Question

Baker Winery manufactures a fine wine in two departments, Fermenting and Bottling. In the Fermenting Department, grapes are aged in casks for a period of 30 days. In the Bottling Department, the wine is bottled and then sent to the finished goods warehouse. Labor and overhead are incurred uniformly through both processes. Materials are entered at the beginning of both processes. Cost and production data for the Fermenting Department for December 2020 are presented below: Cost data Beginning work in process inventory $37,000 ($30,000 of materials cost) Materials 390,000 Conversion costs 116,000 Total costs $543,000 Production data Beginning work in process (gallons) 5,000 (40%) Gallons started into production 79,000 Ending work in process (gallons) 8,000 (75%)

Instructions:
a) compute the equivalent units of production
b) Determine the unit production costs
c) Determine the costs to be assigned to units transferred out and ending work in process.

Answer 1

a) 84,000 units ( materials )

82,000 units ( conversion )

b) $6.5

c) $494,000 ( material )

$494,000 ( conversion )

Step-by-step explanation:

a) Calculate the equivalent unit of production

applying the weighted average method

for the units completed and transferred out

= 5000 + 79000 - 8000 = 76000 ( material ) , Conversion = 76000

For ending work in process

= 8000 ( material ) , conversion = 8000 * 75% = 6000

∴ equivalent units of production

= 76000 + 8000 = 84,000 units ( materials )

and

= 76000 + 6000 = 82,000 units ( conversion )

B) calculate the unit production costs

Total cost incurred till date = beginning work in process + current period cost

= 30,000 + 390,000 = 420,000 ( material )

(conversion) = 123,000.

Equivalent units = 84,000 ( materials ) , 82,000 ( conversion )

cost per unit = 420,000 / 84000 , 123000/ 82,000

= 5 , 1.5

Hence Total unit cost = $6.5 ( i.e. 1.5 + 5 )

C) cost to be assigned

76000 * 6.5 = $494,000 ( material )

76000 * 6.5 = $494,000 ( conversion )