Process Costing

Homework Problem

'Erbal Energy Company $($EEC$)$ sells packaged, fresh herbs to health food stores. The company has several departments; however, we

are going to focus on the last processing department, Packaging.

The cleaned, loose herbs come into the Packaging department from the Cleaning department. The Packaging department has two

direct materials. The first material, a cellophane pouch, is added at the beginning of the process. The pouch is filled with $4$ ounces of

herbs, then sealed. The second material, a label, is then folded over the sealed pouch and stapled on$.$ This occurs at the end of the

process. Normal spoilage in the Packaging department is $\frac{1}{2}$ of $1\%$ of good packages completed and transferred. Spoilage is not

detected until the end of the process.

The following unit and cost information is available for April and May:

Interim answers should be rounded to $3$ places after the decimal. Final answers should be rounded to the nearest dollar.

Required:

Assume the company uses FIFO process costing to assign production costs. For each month:

A$.$ Calculate the cost transferred from Packaging to Finished Goods, the cost of abnormal spoilage, and the value of the ending

inventory in Packaging. $($Hint: Some information is given in ounces, some in packages. Convert the packages into ounces.$)$

B$.$ Determine the per package cost of the units completed and transferred.

C$.$ Prepare the necessary journal entries to record the transfer from Packaging.