Problem 3: Process Costing-Weighted Average Method

AgroWorld company manufacture a high-quality fertilizer, which is used primarily by commercial vegetable growers. Two departments are involved in the production process. In the Mixing Department, various chemicals are entered into production. After processing, the Mixing Department transfers chemical called Chemgro to the Finishing Department. There the product is completed, packaged, and shipped under the brand named Vegegro.

In the Mixing Department, the raw material is added at the beginning of the process. Labour and overhead are applied continuously throughout the process. All departmental overhead is traced to the departments, and plant overhead is allocated to the departments on the basis of direct-labour. The plant overhead rate for 20x2 is $.40 per direct-labour dollar.

The following information relates to production during November 20x2 in the Mixing Department.

a. Work in process, November 1 (4, 000 pounds, 75 percent complete as to conversion):

Raw material $22, 800

Direct labour at $5.00 per hour 24, 650

Departmental overhead 12, 000

Allocated plant overhead9, 860

b. Raw material:

Inventory, November 1, 2000 pounds$10, 000

Purchases, November 3, 10 000 pounds51, 000

Purchases, November 18, 10 000 pounds51, 500

Released to production during November, 16,000 pounds

c.Direct-labour cost, $103, 350

d.Direct departmental verhead costs, $ 52, 000

e.Transferred to Finishing Department, 15, 000 pounds

f.Work in process, November 30, 5000 pounds, 20 percent complete

The company uses weithted-average process costing to accumulate product costs.However, for raw-material inventories, the firm uses the FIFO (i.e. first in first out) inventory method.

Requird:

1.Prepare a production report for the Mixing Department for November 20x2. The report should show:

a.Equivalent units of production by cost factor (i.e., direct material and conversion).

b.Cost per equivalent unit for each factor. (Round your answers to the nearest cent.)

c.Cost of Chemgro transferred to the Finishing Department.

d.Cost of the work-in-process inventory on November 30, 20x2, in the Mixing Department.

2.Prepare journal entries to record the following events:

a.Release of direct material to producgtion during November.

b.Incurrence of direct-labour costs in November.

c.Application of overhead costs for the Mixing Department (direct departmental and allocated plant overhead costs.)

d.Transfer of Chemgro out of the Mixing Department.