Cambria Winery in Santa Maria, California, has two departments: Fermenting and Pack-aging. Direct materials are added at the beginning of the fermenting process (grapes) and at the end of the packaging process (bottles). Conversion costs are added evenly throughout each process. Data from the month of March for the Fermenting Department are as follows:

Gallons:

Beginning work in process inventory........................................................ 2,900 gallons

Started production.................................................................................... 4,770 gallons

Completed and transferred out to Packaging in March........................... 6,420 gallons

Ending work in process inventory (80% of the way through the

fermenting process)............................................................................... 1,250 gallons

Costs:

Beginning work in process inventory ($ 2,100 of direct materials

and $ 1,409 of conversion cost).............................................................. $ 3,509

Costs added during March:..........................................................................

Direct materials.......................................................................................... $ 10,172

Direct labor................................................................................................ 1,000

Manufacturing overhead........................................................................... 1,301

Total costs added during March $ 12,473

Requirements

1. Draw a time line for the Fermenting Department.

2. Summarize the flow of physical units and compute the total equivalent units.

3. Summarize total costs to account for and compute the cost per equivalent unit for direct materials and conversion costs.

4. Assign total costs to units (gallons): a. Completed and transferred out to the Packaging Department b. In the Fermenting Department ending work in process inventory

5. What is the average cost per gallon transferred out of Fermenting into Packaging? Why would the company’s managers want to know this cost?