Question 4 Icy Delight Company, which manufactures quality ice cream sold at premium prices, uses a single production department. Production begins with the blending of various ingredients, which are added at the beginning of the process, and ends with the packaging of the ice cream. Packaging occurs when the mixture reaches the 90% stage of completion. The two-litre cartons are then transferred to the shipping department for shipment. Labour and overhead are added continuously throughout the process. Manufacturing overhead is applied on the basis of direct labour hours at the rate of $3 per hour. The company has always used the weighted average method to determine equivalent units of production and unit costs. Now, production management is considering changing from the weighted average method to the first-in, first-out method. The following data relate to actual production during the month of May: Costs Work in process inventory, May 1 (16,000 litres; 15% complete) Direct materials (ingredients) Direct labour ($10 per hour) Manufacturing overhead $45,600 6,250 1,875 Costs Incurred Direct materials (ingredients) $228,400 Direct materials (cartons) 7,000 Direct labour ($10 per hour) 35,000 Manufacturing overhead 10,500 Production Units Litres Work in process inventory, May 1 (15% complete) 16,000 Started in May 84,000 Sent to shipping department 80,000 Work in process inventory, May 31 (95% complete) 20,000 (2) First-in, first-out Equivalent Units Material 2 Conversion Costs Physical Units Material 1 Quantities Units to be accounted for Work in process, beginning Started in May Total units Units accounted for Work in process, beginning Material 1 Material 2 Conversion Started and completed Work in process, ending Material 1 Material 2 Conversion Total equivalent units