Question
Healthway uses a process costing system to compute the unit costs of the materials it produces. It has three departments: Mixing, Tableting and Bottling. In
Healthway uses a process costing system to compute the unit costs of the materials it produces.
It has three departments: Mixing, Tableting and Bottling.
In Mixing, the ingredients for the minerals are measured, sifted, and blended together. The mix is transferred out in litre containers.
The Tableting Department takes the powdered milk and places it in capsules. One litre of powdered milk converts into 1600 capsules. After the capsules are filled and polished, they are transferred to bottling, where they are placed in bottles, which are then affixed with a safety seal and a lid and labelled. Each bottle receives 50 capsules.
During July, the following results are available for the first two departments (direct materials are added at the beginning of both departments)
Mixing | Tableting | |
Beginning Inv. | ||
Physical units | 5 litres | 4,000 capsules |
Costs: | ||
Direct Mat | $120 | $32 |
Direct Labour | $128 | $20 |
Overhead | ? | ? |
Transferred in | ----- | 140 |
Current production: | ||
Transferred out | 125 litres | 198,000 capsules |
Ending inv. | 6 litres | 6000 capsules |
Costs: | ||
Direct Mat | $3144 | $1584 |
Transferred in | -- | $15,490 |
Direct Labour | 4,096 | 1,944 |
Overhead | ? | ? |
Percentage of Completion: | ||
Beginning Inventory | 40% | 50% |
Ending Inventory | 50 | 40 |
Overhead in both departments is applied as a percentage of direct labour costs. In the Mixing Department, overhead is 200 percent of direct labour. In the Tableting Department, the overhead rate is 150 percent of direct labour
Required:
1. Calculate the costs allocated to both the Goods Transferred out and the units in ending work in process at the end of the period in the Tableting department using a weighted average method. Round unit costs to four decimal places. Show all calculations and explain methology
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