Q22E Refer to your answers from Exerc... [FREE SOLUTION]

Chapter 18: Q22E (page 1012)

Refer to your answers from Exercise E18-21.
Requirements
1. Prepare the journal entries to record the assignment of direct materials and direct labor and the allocation of manufacturing overhead to the Blending Department. Also, prepare the journal entry to record the costs of the gallons completed and transferred out to the Packaging Department. Assume labor costs are accrued and not yet paid.
2. Post the journal entries to the Work-in-Process Inventory鈥擝lending T-account.
What is the ending balance?
3. What is the average cost per gallon transferred out of the Blending Department
into the Packaging Department? Why would the company managers want to
know this cost?

Short Answer

Expert verified

1.The journal entries to record the assignment of the direct material costing $5,525 and direct labor of $1,500, allocation of manufacturing overhead of $2,547 and the cost of completed and transferred out gallon i.e. $7,930 is done in step 2.

2. The ending balance of the work-in-process inventory account is $1,642

3. The average cost per gallon transferred out of the blending department into the packaging department is $1.22

The management of the company compute this cost to decide the selling price of the product after adding the profit margin.

Step by step solution

Step-by-Step Solution:Step 1: Costing system

A costing system is defined as the system used by the companies to determine the cost of goods manufactured during the year. It is classified as the process and job order costing systems.

Journal entries

Date	Particulars	Debit ($)	Credit ($)
	Work-in-process inventory	5,525
	Direct material		5,525

	Work-in-process inventory	1,500
	Wages payable		1,500

	Work-in-process inventory	2,547
	Manufacturing overhead		2,547

	Finished goods inventory	7,930
	Work-in-process inventory		7,930

Work-in-process inventory – Blending T-account

Particulars	Amount ($)	Particulars	Amount ($)
Beginning balance	0	Finished goods inventory	7,930
Direct material	5,525
Direct labor	1,500
Manufacturing overhead	2,547
		Ending balance	1,642

Average cost per gallon transferred out of the blending department into the packaging department

$Average cost per gallon = \frac{Total cost of the completed goods}{Number of units} = \frac{$ 7, 930}{6, 500} = $ 1.22 鈥�$

The manager of Shea Winery want to know this cost for deciding the selling price of the product. Selling price is derived at by adding the profit margin with the total cost of the products.

Unlock Step-by-Step Solutions & Ace Your Exams!

Full Textbook Solutions
Get detailed explanations and key concepts
Unlimited Al creation
Al flashcards, explanations, exams and more...
Ads-free access
To over 500 millions flashcards
Money-back guarantee
We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Recommended explanations on Business Studies Textbooks

View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

1. Direct labor plus manufacturing Overhead	a. Expresses partially completed units in terms of fully completed units
2. Prepared by department for EUP, production costs, and assignment of costs	b. Used by companies that manufacture homogenous products
3. Equivalent units of production	c. Previous costs brought into later process
4. Process costing system	d. Conversion costs
5. Transferred in costs	e. Combines prior period costs with current period costs
6. Weighted-average method	f. Production cost report

	Beginning WIP	Added this month	Total
Direct materials	\(500	\)2,000	\(2,500
Conversion cost	1,250	5,450	6,700
Total	\)1,750	\(7,450	\)9,200

91影视

Short Answer

Step by step solution

Step-by-Step Solution:Step 1: Costing system

Journal entries

Work-in-process inventory – Blending T-account

Average cost per gallon transferred out of the blending department into the packaging department

One App. One Place for Learning.

Most popular questions from this chapter

Recommended explanations on Business Studies Textbooks

Startups

Nature of Business

Public Relations Business Studies

Project Planning & Management

Corporate Finance

Finance Literacy (Business Studies)

Study anywhere. Anytime. Across all devices.