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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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