Question
Soup Ladle produces a number of popular canned soups. One of them is its signature soup, Beauty Collagen Stew. This bestselling soup contains 10 types
Soup Ladle produces a number of popular canned soups. One of them is its signature soup, Beauty Collagen Stew. This bestselling soup contains 10 types of vegetables, including celery, onion, red carrot, tomato, leek, potato, garden pea, cup mushroom, water chestnut and sweet corn. It is popular also because the natural green ingredients appeal to the taste buds of vegans.
To make a metric tonne (i.e. 1,000kg) of this popular soup, 20 kg of respective ingredients (i.e. 200 kg in total) are required to be cleaned and cut in the preparation department. In the boiling department, 795 kg of water is added together with four ingredients (Category A): sweet corn, red carrot, potato and green pea at the beginning of the boiling stage. Another four ingredients (Category B): celery, onion, tomato and leek are added after boiling the soup for 30 minutes. The remaining vegetables (Category C): water chestnut and cup mushroom are added when the soup is 90% done.
5kg of a collagen ingredient in the form of a special powder is added when the soup is 80% done. A normal loss of 5% of the total inputs in the current period is expected, due to the effects of evaporation during the boiling process. The rate of evaporation leading to soup losses, is largely determined by the control of the temperature in the boiling systems, which is manually monitored by the kitchen staff. After a total of an hour's high pressure cooking, the soup will be transferred to the canning department for the final process before the total losses in output is determined.
In the month of December, the company has 5,000kg of 60% completed Beauty Collagen Stew brought forward from the operation on 30 November. During the month, the company produced a total of 85,000 kg of the Beauty Collagen Stew. On 31 December, there were 8,000kg of 85% completed Beauty Collagen Stew. 7,000kg of the stew was established at the end of the boiling process, to be lost through evaporation during the cooking. The following is the actual operating and cost information for the month of December.
WIP at 1st December Added in December S Materials Water 80 1,880 Category A 800 16,840 Category B 900 21,640 Category C 22,500 Collagen Powder 15,680 Conversion 1.500 52.708Required: (a) Use process costing to prepare a production cost report for Beauty Collagen Stew for December using the FIFO method. Your report should show the following: (i) Equivalent units computed for production with legards to each cost category (nearest 5 decimal places). (ii) Costs of normal spoilage and abnormal spoilage (show a separate computation of how normal spoilage in kg is derived). (iii) Cost of units transferred out of Boiling Process. (iv) Cost of Ending WlPStep by Step Solution
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