Cove Point Winery in Lusby, Maryland, has two departments: Fermenting

Cove Point Winery in Lusby, Maryland, has two departments: Fermenting and Packaging. 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 through-out each process. Data from the month of March for the Fermenting Department are as follows:

Gallons:

Beginning work in process inventory................................................ 2,000 gallons

Started production............................................................................ 6,000 gallons

Completed and transferred out to Packaging in March................... 6,550 gallons

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

the fermenting process)....................................................................... 1,450 gallons


Costs:

Beginning work in process inventory ($ 2,800 of direct materials and

$ 2,855 of conversion cost)............................................................. $ 5,655

Costs added during March:

Direct materials.................................................................................. $ 8,800

Direct labor........................................................................................ 1,600

Manufacturing overhead................................................................... 2,484

Total costs added during March........................................................... $ 12,884


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 thiscost?