Snape, Inc. manufactures mouthwash among other products. They had no finished goods inventory for mouthwash at the beginning of 2021. They have only one processing department for this product. A review of the company’s inventory records shows the following:

At the beginning of January 2021, Snape has 3,500 gallons of mouthwash in process. (costs $8,410 for materials, 1,663 for labor and 4,990 for overhead)

During 2021, Snape finishes/transfers 162,000 gallons of mouthwash.

On December 31, 2021, Snape has 6,200 gallons of mouthwash that is 75% complete (applies to labor and overhead). Direct materials are added half at the beginning of the process and half after the process is 60% complete.

Overhead is allocated to the department based on machine hours, set ups and direct labor hours. The cost of direct materials added was $103,320. The direct labor hours were 9,356 at $16.00 per hour (labor cost). The estimated maintenance cost for 2021 is $225,000 and the estimated machine hours (cost driver for maintenance) were 75,000. The mouthwash processing department used 25,000 machine hours in 2021. The estimated cost of set ups for the year is $49,200 and there will be an estimated 200 set ups for the entire year. In 2021, the mouthwash processing needed 72 set ups. The labor related overhead is allocated at a rate of $5.56 per direct labor hour.

1. Determine the equivalent units and the unit costs for materials and labor/overhead for 2021 using the weighted average approach.
2. Show all journal entries and T accounts for the adding of costs to the department.
3. Determine the amount of cost that should be assigned to the ending work in process and finished goods inventories. (Show that all costs are accounted for)
4. Prepare the journal entry necessary to record the transfer of costs from WIP to Finished Goods.
5. Determine cost of goods sold assuming that there is no under or over applied overhead and there are 15,000 units left in finished goods (show needed journal entries to record the sale of the units at $4.00 each).

Answer rating: 100% (QA)

Answer Equivalent units Materials 1000 gallons 75 750 gallons Labor and overhead 10... View the full answer