Color Explosion prepares and packages paint products. Color Explosion has two departments: Blending and Packaging. Direct materials are added at the beginning of the blending process (dyes) and at the end of the packaging process (cans). Conversion costs are added evenly throughout each process. The company uses the weighted-average method. Data from the month of May for the Blending Department are as follows:
Gallons
Beginning Work-in-Process Inventory ................................ 0 gallons
Started in production ............................................... 8,500 gallons
Completed and transferred out to Packaging in May ......... 6,500 gallons
Ending Work-in-Process Inventory (30% of the way ......... 2,000 gallons
through the blending process)
Costs
Beginning Work-in-Process Inventory ................................. $ 0
Costs added during May:
Direct materials ........................................................ 5,525
Direct labor ............................................................. 1,500
Manufacturing overhead allocated .................................. 2,547
Total costs added during May ..................................... $ 9,572
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-Blending 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?