Refer to the data and your answers from Exercise E20-23.
Shea Winery in Pleasant Valley, New York, 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 throughout each process. The company uses the weighted-average method. Data from the month of March for the Fermenting Department are as follows:
Gallons
Beginning Work-in-Process Inventory .................................... 500 gallons
Started in production ...................................................... 8,600 gallons
Completed and transferred out to Packaging in March .............. 7,900 gallons
Ending Work-in-Process Inventory (80% of the way ............... 1,200 gallons
through the fermenting process)
Costs
Beginning Work-in-Process Inventory:
Direct materials .................................................................. $ 540
Direct labor ......................................................................... 195
Manufacturing overhead allocated .............................................. 210
Costs added during March:
Direct materials ................................................................ 9,288
Direct labor ...................................................................... 3,305
Manufacturing overhead allocated ........................................... 3,378
Total costs added during March ......................................... $ 15,971
Requirements
1. Prepare the journal entries to record the assignment of direct materials and direct labor and the allocation of manufacturing overhead to the Fermenting Department. Assume labor costs are accrued and not yet paid. Also prepare the journal entry to record the cost of the gallons completed and transferred out to the Packaging Department.
2. Post the journal entries to the Work-in-Process Inventory-Fermenting T-account. What is the ending balance?
3. What is the average cost per gallon transferred out of the Fermenting Department into the Packaging Department? Why would Shea Winery's managers want to know this cost?