As the final exams are approaching, a team of Sejong students being very business minded have decided
Question:
As the final exams are approaching, a team of Sejong students being very business minded have decided to produce and sell a memory cum concentration booster drink in a sealed bottle to help students better cope with their studies. The drink will be "homemade" by renting a mixing and a bottle sealing machine.
The costs of the drink include the purchase of various vitamins, cordyceps and lingzhi in powder form. In addition, sweetened mineral water and plastic bottles are required. In order to optimize the power of the drink, various powders are added in different timings according to a secret manual. For the two special Chinese herbs, cordyceps and lingzhi which help increase memory, concentration and energy, have to be added separately. 100% of the cordyceps powder is added when the mixing process is 90% complete. For lingzhi, 30% is added when the process is 50% complete, and the rest is added when the process is 80% complete. Vitamins, sweetened mineral water and bottles are added at the beginning of the process.
During the third day of production, the team had 50 bottles in the beginning work in process that were 80% complete. The team incurred $25 of vitamins, sweetened mineral water and bottles, $15 of lingzhi and $40 conversion costs during the second day of production for these 50 bottles.
800 bottles were started into production during the third day, at the end of the day, 30 bottles were partially completed at 60% with respect to conversion. Costs spent in day three included:
Vitamins, sweetened mineral water and bottles - $400
Cordyceps - $2,460
Lingzhi - $814
Conversion costs - $1,636
1) The team uses the weighted-average method in its process costing system, compute for the third day:
a) The equivalent units (EU) for lingzhi
b) The total unit cost
c) The total value of ending work in process
2) What would be the effect of i) above if the company uses the first-in-first-out valuation method?
Cost Management Accounting and Control
ISBN: 978-0324559675
6th Edition
Authors: Don R. Hansen, Maryanne M. Mowen, Liming Guan