The product requires processing in two departments. Materials are added at the beginning of the process in department 1. Department 2 finishes the product but adds no direct materials. During the year work was begun on 120,000 units in department 1, and 90,000 of these units were transferred to department 2. The remaining 30,000 units were 60% complete with regard to conversion costs in department 1, which incurred $540,000 of materials costs and $280,800 of conversion costs. Department 2 completed and sent 70,000 units to the finished goods warehouse. It ended the period with 20,000 units 40% complete with regard to department 2's conversion costs, which were $655,200 for the period. The plan for next year is to begin an additional 150,000 units in department 1. Management expects to finish the year with 50,000 units one-half converted in department 1. Department 2 is expected to complete 140,000 units, and its ending inventory is expected to be 70% complete. Materials are expected to be $729,000 and conversion costs for departments 1 and 2 are expected to be $290,900 and $1,181,500, respectively. Required: 1. a cost report for the current year and a budgeted report for next year using a spreadsheet. Assume the firm uses weighted-average process costing.

2. Using the spreadsheet developed in requirement 1, answer the following 'what if' questions.

(a) There were some problems on the product line in both departments of the current year and only 50% of the units were completed then what was expected, however, the material costs reduced by 40% and the conversion costs reduced by 10% in both departments. It was suggested that only 80,000 units be started in department 1 in the following year. No other amounts changed for the following year. (b) The production of the new product went better than anticipated in the current year. Both department 1 and 2 completed 20% more units than expected in the current year. The

material costs increased by 15% while the conversion costs remained the same. There seems to be consensus among the production workers that the projections for next year should be revised but this has not been done yet. Therefore projections for costs and numbers of units completed remain the same for the following year.

3. Include in your report to management some comments regarding your cost reports