Question
Units and kg. are used synonymously. There is 10,000 normal spoilage and no abnormal spoilage in the Compounding (first) Dept. There is no normal spoilage
Units and kg. are used synonymously. There is 10,000 normal spoilage and no abnormal
spoilage in the Compounding (first) Dept. There is no normal spoilage and 10,000 abnormal
spoilage in the Packaging (second) Dept.
Crespel Company manufactures an antiseptic powder in two successive production departments,
Compounding and Packaging. A process cost accounting system and absorption costing are
used. The inventory of Work in Process - Compounding and Work in Process-Packaging is
costed by the weighted average cost method. The Finished Goods inventory account is costed
under the specific units method.
At January 1, 2020, the company's beginning inventory balances were as follows:
Raw Materials .................................................
$300,000
Work in process Compounding:
Raw materials ......................................... $108,000
Conversion costs ....................................
66,000
174,000
Work in process-Packaging :
Transferred in cost $150,000
Raw materials ....................................... 70,000
Conversion costs ...................................
30,000
250,000
Finished Goods (80,000 kg) ..........................
556,000
In the Compounding department, the first production process, the
beginning inventory
consisted
of 60,000 kg of product, two-thirds (2/3) complete with respect to materials and half ()
complete with respect to labour and manufacturing overhead.
{Remember, ignore stage of completion in beginning inventory using Weighted Average}
In the Packaging department, the
beginning inventory
consisted of 40,000 kg, 100% complete
with respect to materials, and half () complete with respect to labour and manufacturing
overhead.
{Remember, ignore stage of completion in beginning inventory using Weighted Average}
During year 2020, raw materials purchases totalled $2,400,000. Raw materials were issued to
the two production departments in the following amounts:
Compounding .......................................
$2,160,000
Packaging .............................................
320,000
Direct labor costs in the two departments were as follows:
Compounding ....................................... 200,000 hrs. @ $5 = $1,000,000
Packaging .............................................
146,000 hrs. @ $4 = $ 584,000
Manufacturing overhead is applied to production at the following normal rates per direct labour
hour:
Compounding
Packaging
Fixed ................................... $2.50 $3.00
Variable .............................. 0.75 0.50
During year 2020, a total of 740,000 kg of product were completed in the Compounding
department and transferred to Packaging. At the end of the year, 75,000 kg remained in process
in Compounding. This inventory was 80% complete with respect to materials and 40% complete
with respect to conversion costs.
In the Packaging department, a total of 710,000 kg of product were completed and transferred to
the warehouse for finished product. The inventory in the Packaging process at the end of the
year was comprised of 60,000 kg, 100% complete as to materials and half () complete as to
conversion costs.
During the year, 700,000 kg of product were sold for $7,000,000. All units sold came from the
current year product.
Required:
1) Compute Conversion Cost in both departments.
2) Production Cost worksheet for the Packaging department.
3) Prepare journal entries to record all of the manufacturing operations of Crespel Company
for year 2020. Show variable and fixed costs separately. Present any necessary
supporting schedules or computations.
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