This problem has a value of
10% of the final grade
Objective: Demonstrate application of Process Costing of
a manufacturing company including the following:
·
Determine Department
WIP inventory
·
Calculation of
Equivalent Units
·
Determine
Finished Goods Inventory
·
Calculation of
COGS
·
Determination of
Gross Profit
Adam’s Apple Company makes
homemade applesauce using Grandma Adam’s special recipe. The company uses a FIFO process cost system. The process starts in the Kettle Room where
apples are cored, cut and added to the Kettles along with Grandma’s special
spices. After several hours of slow
simmering, the sauce is cooled as it moves to the Canning department where the
sauce is poured into jars and sealed.
After the jars are sealed they move to the packing department where they
are placed into boxes and moved to finished goods where they are ready for
sale. During the month of March the
company sold 5,000 boxes of sauce with each box holding a dozen jars. A jar of
sauce sells for $4.00.
1. Create the
WIPs for each department indicating the Cost of each jar as it moves through
the process.
2. Using the
following information, determine the Gross Profit for the month of March.
Kettle Department: Beginning Balance 16000 at 90% complete with Costs of $13,600
Ending
Inventory 4000 jars at 20% completion
DM used $ 21,280
DL used $
8,000
FOH allocated $ 6,560
Canning Department: Beginning Balance 28,000 at 30% complete
with costs of $33,600
Jars Started 50,000
Jars Transferred to
Packing 62,000
Ending Inventory was
40% completed
DM used $ 30,000
DL used $ 14,800
FOH allocated $ 19,500
Packing Department: Beginning Balance 14,000 at 75% complete
with costs of $18,990
Ending Inventory 23,000 jars at 10% completed
DM used $ 14000
DL used $ 5600
FOH allocated $ 11000
Finished Good Department: Beginning
Balance 21,500 jars with costs of $ 47,515
DL used $ 18,625
FOH allocated $11,175
