Question
Wolongong Fisheries processes smoked salmon for various retail clients. The salmon is introduced into the smoking process at once, but the smoking process itself takes
Wolongong Fisheries processes smoked salmon for various retail clients. The salmon is introduced into the smoking process at once, but the smoking process itself takes some time, and therefore it has work-in-progress inventory. After the smoking is finished, the smoked salmon is transferred to the packaging department. For the month of January 2019, the following data is known about the activities in the smoking process:
- Work-in-progress at January 1st was 20,000 kilogram, fully completed with respect to materials (salmon) costs, and 30% completed with respect to the conversion costs. The costs in this opening stock are 58,000 in materials costs, and 11,400 in conversion costs. -During January, 110,000 kilogram of salmon was entered into the smoking process.
-100,000 kilogram of smoked salmon was transferred out of the smoking process into the packaging department during January.
* At the end of the month, work-in-progress inventory was 30,000 kilogram, fully completed with respect to materials costs, and 60% completed with respect to the conversion costs.
* Costs added during January were 352,000 in materials (salmon) costs, and 235,200 in conversion costs, for a total of 587,200.
A) Explain what part of the costs added during January of 587,200 you would classify as direct costs and what part as indirect costs for the purpose of calculating the unit cost of a kilogram of smoked salmon.
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