Sunshine Beach Company manufactures a suntan lotion, called Surtan, in 350-ml plastic bottles. Surtan is sold in a competitive market. As a result, management is very cost-conscious. Surtan is manufactured through two processes: mixing and filling. Materials are entered at the beginning of each process, and labour and manufacturing overhead occur uniformly throughout each process. Unit costs are based on the cost per litre of Surtan using the weighted-average costing approach.

On June 30, 2016, Jill Ritzman, the chief accountant for the past 20 years, opted to take early retirement. Her replacement, Sid Benili, had extensive accounting experience with motels in the area but only limited contact with manufacturing accounting. During July, Sid correctly accumulated the following production quantity and cost data for the mixing department.

Production quantities: Work in process, July 1, 8,000 litres, 75% complete; started into production 91,000 litres; work in process, July 31, 5,000 litres, 20% complete. Materials are added at the beginning of the process.

Production costs: Beginning work in process $88,000, comprising $21,000 of materials costs and $67,000 of conversion costs; incurred in July-materials $573,000, conversion costs $769,000. Sid then pre- pared a production cost report on the basis of physical units started into production. His report showed a production cost of $15.71 per litre of Surtan. The management of Sunshine Beach was surprised at the high unit cost. The president comes to you, as Jill's top assistant, to review Sid's report and prepare a correct report if necessary.

Instructions

(a) Show how Sid arrived at the unit cost of $15.71 per litre of Surtan.

(b) Explain what error(s) Sid made in preparing his production cost report.

(c) Prepare a correct production cost report for July.