Question 5Process Costing(20 marks)

This question relates to learning material and objectives from Online Module 5

You have been seconded to the Skywalker Confectionery Co which is a subsidiary of the Empire Group to work in the management accounting cost team. You have been asked to prepare end of period product costing for a range of different product lines including the 'Chewy Chewbacca' range of jubes. The Skywalker factory operates continuously 24 hours a day, 7 days a week. The management accounting team utilises a process costing system to manage production costs.

'Chewy Chewbacca' jubes are manufactured by first mixing the ingredients, which are then poured into moulds for cooking, which are then cooled, removed, and wrapped. All Raw Material ingredients for the jubes are added at the commencement of the process. The wrapping is the other additional cost which occurs when the products are 90% of the way through the process. For the purpose of accounting the raw materials are assumed to be all added at the start and the wrapping occurs when the product has completed 90% of the process. Conversion costs of manufacturing are assumed to occur evenly across the whole of the production cycle which takes approximately 1.5 hours.

The following information relates to the production of 'Chewy Chewbacca' confectionary during the month of May 2021. The Stock Keeping Unit (SKU) adopted for inventory purposes is a batch pack of 1,000 individual jubes.

Work-in-Process: May 1, 2020

83,731 SKUs

Stage of completion

Value

Ingredients

100%

$459,232

Wrapping

0

$0

Conversion

30%

$186,100

Work-in-Process: May 31, 2021

86,713 SKUs

95% Complete

A total of 5,126,400 SKUs were commenced during May and the following costs were incurred.

Costs incurred during May 2021:

Ingredients

$24,546,500

Wrapping

$475,652

Conversion

$38,236,400

Required:

i.Using the Weighted Average Cost Method determine the cost value of closing WIP and the cost value of goods transferred out during the period.(10 marks)

ii.Using the First In First Out (FIFO) method determine the cost value of closing WIP and the cost value of goods transferred out during the period.(10 marks