Shelton Winery in Kingston, New York, has two departments: Fermenting and Packaging. Direct materials are added at
Question:
Shelton Winery in Kingston, 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. Data from the month of March for the Fermenting Department are as follows:
Gallons:
Beginning work in process inventory................................................ 3,000 gallons
Started production............................................................................. 4,840 gallons
Completed and transferred out to Packaging in March..................... 6,490 gallons
Ending work in process inventory (80% of the way through the
fermenting process) ...........................................................................1,350 gallons
Costs:
Beginning work in process inventory ($2,000 of direct materials and
$3,615 of conversion cost)............................................................
Costs added during March: $ 5,615
Direct materials............................................................................................ 8,192
Direct labor.................................................................................................. 1,050
Manufacturing overhead...............................................................................2,148
Total costs added during March.............................................................. $11,390
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 Shelton's managers want to know this cost?
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