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Question 1 Happy Drink Ltd is the licensed bottler of a reputable overseas beverage company for Singapore. It imports concentrates, mixes them with other ingredients

Question 1 Happy Drink Ltd is the licensed bottler of a reputable overseas beverage company for Singapore. It imports concentrates, mixes them with other ingredients and bottles the resulting beverage under the brand name "Refresh" for sales in Singapore.

In the Mixing Process, other ingredients (water, flavouring agents, sugar and carbon dioxide) are added to the concentrates. These are then transferred to the Bottling Process where the beverage is then bottled into standard 250ml cans and transferred to the finished goods store for deliveries to the customers.

Concentrates are issued at the beginning of the Mixing Process. The other mixing costs (including other ingredients) are incurred evenly throughout that process. Similarly, cans are added at the beginning of the Bottling Process while the other costs are incurred evenly.

Overhead is applied into the mixing and the bottling, at a rate of 50% and 100% of direct labour cost respectively.

It is considered normal for some of the beverage to be lost due to evaporation during mixing and some cans of beverage to be rejected during bottling. Quality control inspection is applied at the end of the Bottling Process to determine whether completed products are safe for consumption. Those canned drinksthat are deemed unsafe are rejected and considered as spoilt.

It is acceptable that spoilage is normal if rejected cans of beverage are no more than 2% of the completed good cans of beverage produced.

The loss of the beverage in the Mixing Process is assumed to take place at the end of the process. The cost of this loss is written off as a loss of the period in which it occurs. This cost is measured at the cost of the concentrates plus the costs of the Mixing Process, but no bottling cost is charged.

Happy Drink Ltd uses FIFO system of costing.

The following data summarize the firms activities during August:

Opening WIP

Concentrates $50,000

Other ingredients $9,000

Direct labour cost (mixing) to 31 Jul $12,000

30% of conversion done 100,000 litres

Costs incurred during August

Concentrates $112,000

Other ingredients $72,840

Cans $76,800 Direct labour cost (mixing) $97,120

Direct labour cost (bottling) $153,600

Production data for August

Units started in Mixing Process 224,000 litres

Good cans completed from Bottling Process 720,000 cans

Spoiled units (bottling) 48,000 cans

Lost units (mixing) 4,000 litres

None of the opening work in process and closing work in process had entered the Bottling Process. The units in the closing work in process were on average 60% complete as to the Mixing Process; none had entered the Bottling Process.

Required:

(a) Using the four-step approach:

(i) Calculate the closing work in process for the Mixing Process in litres and for the Bottling Process in cans. (7 marks)

(ii) Calculate the number of equivalent units processed in August, distinguishing between Mixing Process and Bottling Process. (9 marks)

(iii) Calculate the costs per equivalent unit for each product cost category processed in August for the Mixing Process and the Bottling Process, the costs of beverage per litre transferred from the Mixing Process to the Bottling Process, the cost of each can of bottled beverage transferred from the Bottling Process, the costs of abnormal spoilage, lost and closing WIP. (28 marks)

(b) Prepare and show all the necessary journal entries. (6 marks)

Please provide detailed answers thank you!

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