Question
Lowe Home, Co. manufactures textile dyes. In accounting for its inventory costs, it uses FIFO Process Costing. The company has two processing departmentsVinegar and Completion.
Lowe Home, Co. manufactures textile dyes.In accounting for its inventory costs, it uses FIFO Process Costing.The company has two processing departmentsVinegar and Completion.
Vinegar, which is the base for all the company's dyes, is distilled from raw ingredients and purified in the Vinegar Department.
Color is then added to the clear vinegar base, the colored dye is squirted under pressure into containers, and the containers are labeled and packed for shipping in the Completion Department.
Information relating to the company's operations for the month are as follows:
1. Issued raw materials for use in production:
Vinegar Department, $851,000; and Completion Department, $629,000.
2. Incurred direct labor costs:
Vinegar Department, $330,000; and Completion Department, $270,000.
3. Applied manufacturing overhead cost:
Vinegar Department, $665,000; and Completion Department, $405,000.
4. Transferred vinegar base from the Vinegar Department to the Completion Department, $1,850,000.
5. Transferred dye that had been prepared for shipping from the Completion Department to Finished Goods, $3,200,000.
Required:
1) Show the T accounts for the following accounts:
Vinegar WIP (beginning balance was $150,000)
Completion WIP (beginning balance was $70,000).
2) Determine the cost of ending WIP inventories and of units transferred out of the Vinegar Department in during the month. The following additional information is available regarding production in the Vinegar Department during the month:
Production data:
Units (gallons) in process, beginning: materials 100% complete;
labor and overhead 60% complete . . . . . . . . . . . . .. . . . . . .30,000
Units (gallons) started into production during the month. . . . . . . . . . . . . .420,000
Units (gallons) completed and transferred to the Completion Department. . .. . 370,000
Units (gallons) in process, end of month: materials 50% complete;
labor and overhead 25% complete . . . . . . . . . . . . . . . . . . . . . . . . . . . .80,000
Cost data:
Work in process inventory, beginning:
Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 92,000
Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21,000
Overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37,000
Total cost of beginning work in process . . . . . . . . . . . . . . . . . . . . $150,000
Cost added during the month:
Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 851,000
Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .330,000
Overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .665,000
Total cost added during the month. . . . . . . . . . .. . . . . . . . . . . . . $1,846,000
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