Landon Dairy produces an organic butter that is sold by the pound. The production of the butter begins in the Churning Department.
Data for the Churning Department for January follows:
Units in beginning Work in Process (WIP) inventory........................................35,000 units
Units started during the month (all direct materials, including cream
and salt, are added at the beginning of the churning process)..........................385,000 units
Units in ending Work in Process (WIP) inventory (60% of the way
through the process).............................................................................................20,000 units
Cost information is as follows:
WIP-Churning Department balance as of January 1:
Direct material cost included in beginning WIP balance.........................................$122,500
Conversion cost included in beginning WIP balance...................................................14,000
Beginning balance, WIP, January 1.........................................................................$136,500
Manufacturing costs incurred during January:
Direct materials used.............................................................................................$1,347,500
Direct labor...................................................................................................................25,000
Manufacturing overhead............................................................................................290,600
Total manufacturing costs entered into production during January......................$1,663,100
Requirements
1. Prepare a production cost report for January for the Churning Department.
2. How much did it cost to make one pound of butter in the Churning Department?
3. How much did it cost to make a partially completed pound of butter in the Churning Department? Does this make sense? Why or why not?