Paulson Winery in Pleasant Valley, New York, has two departments: Fermenting and Packaging. Direct materials are added at the beginning of the fermenting process (grapes) and at the end of the packaging process (bottles). Data from the month of March for the Fermenting Department are as follows.
Requirement 1. Prepare the journal entries to record the assignment of direct materials and direct labor and the allocation of manufacturing overhead to the Fermenting Department. Assume labor costs are accrued and not yet paid. Also prepare the journal entry to record the cost of the gallons completed and transferred out to the Packaging Department. Begin with the summary journal entry to record the assignment of direct materials and direct labor and the allocation of manufacturing overhead to the Fermenting Department (Prepare a single compound journal entry. Record debits first, then credits. Exclude explanations from any journal entries.) Date Accounts Debit Credit Mar. 31 Also prepare the journal entry to record the cost of the gallons completed and transferred out to the Packaging Department Date Accounts Debit Credit Mar. 31 Requirement 2. Post the journal entries to the Work-in-Process Inventory-Fermenting T-account What is the ending balance? Post the entries using the appropriate descriptions as posting references. Denote the ending balance as "Bal. Work-in-Process Inventory-Fermenting Beg. Bal. 2,970 Work-in-Process Inventory-Fermenting Beg. Bal 2,970 Requirement 3. What is the average cost per gallon transferred out of the Fermenting Department into the Packaging Department? Why would Paulson Winery's managers want to know this cost? (Round your answer to the nearest cent.) The average cost per gallon transferred out of Fermenting is $ per gallon Why would Paulson Winery's managers want to know this cost? ( A. Managers use the cost per gallon for external financial reporting specifically to calculate the ending inventory balances on the Balance Sheet O B. Managers use the cost per gallon for external financial reporting-specifically to calculate the Cost of Goods Sold on the Income Statement. C. Managers would compare the average cost per gallon against their budgeted costs to determine whether the costs of the blending process remain under control. If budgeted costs are higher than the actual average cost per gallon, then the managers have done a good job controlling costs. In contrast, if the budgeted costs are lower than the actual average cost per gallon, managers will investigate the reason for the higher-than-expected costs in an effort to regain control over costs. D. All of the above are reasons why management would be interested in this cost per unit for gallons completed and transferred out to Finished Goods Inventory Gallons Beginning Work-in-Process Inventory Started in production Completed and transferred out to Packaging in March Ending Work-in-Process Inventory (80% of the way through the fermenting process) 600 gallons 9,300 gallons 4,800 gallons 5,100 gallons Costs Beginning Work-in-Process Inventory Direct materials Direct labor Manufacturing overhead allocated $ 2,560 210 200 Costs added during March Direct materials Direct labor Manufacturing overhead allocated 8,330 3,030 4,552 $ 15,912 Total costs added during March Paulson Winery Production Cost Report - Fermenting Department (Partial) Month Ended March 31 Direct Conversion Total COSTS Materials Costs Costs Costs to account for 2,560 S 8,330 10,890 $ 9,900 2,970 15,912 18,882 Beginning work-in-process 410 $ Costs added during the period Total costs to account for Divided by: Total equivalent units of production Cost per equivalent unit Costs accounted for 7,582 7,992 $ 8,880 0.90 1.10 $ 5,280 $ 5,610 10,890 $ 4,320 S 3,672 7,992 $ 9,600 9,282 18,882 Completed and transferred out Ending work-in-process Total costs accounted for 1. Prepare the journal entries to record the assignment of direct materials and direct labor and the allocation of manufacturing overhead to the Fermenting Department. Assume labor costs are accrued and not yet paid. Also prepare the journal entry to record the cost of the gallons completed and transferred out to the Packaging Department. Post the journal entries to the Work-in-Process Inventory-Fermenting T-account. What is the ending balance? 2. 3. What is the average cost per gallon transferred out of the Fermenting Department into the Packaging Department? Why would Paulson Winery's managers want to know this cost
