Cooperative San José of southern Sonora state in Mexico makes a unique syrup usi
ID: 2445438 • Letter: C
Question
Cooperative San José of southern Sonora state in Mexico makes a unique syrup using cane sugar and local herbs. The syrup is sold in small bottles and is prized as a flavoring for drinks and for use in desserts. The bottles are sold for $12 each. The first stage in the production process is carried out in the Mixing Department, which removes foreign matter from the raw materials and mixes them in the proper proportions in large vats. The company uses the weighted-average method in its process costing system.
Management would like some additional information about Cooperative San José’s operations.
Equivalent units of production:
Materials ?
Conversion ?
What were the costs per equivalent unit for the month? The beginning inventory consisted of the following costs: materials, $15,642; and conversion cost, $7,900. The costs added during the month consisted of: materials, $63,274; and conversion cost, $34,312. (Round your answers to 2 decimal places.)
cost per equivalent unit:
Materials ?
Conversion ?
How many of the units transferred to the next department were started and completed during the month?
Units started and completed during April = ?
The manager of the Mixing Department stated, “Materials prices jumped from about $1.80 per unit in March to $2.30 per unit in April, but due to good cost control I was able to hold our materials cost to less than $2.30 per unit for the month.” Should this manager be rewarded for good cost control?
Cooperative San José of southern Sonora state in Mexico makes a unique syrup using cane sugar and local herbs. The syrup is sold in small bottles and is prized as a flavoring for drinks and for use in desserts. The bottles are sold for $12 each. The first stage in the production process is carried out in the Mixing Department, which removes foreign matter from the raw materials and mixes them in the proper proportions in large vats. The company uses the weighted-average method in its process costing system.
A hastily prepared report for the Mixing Department for April appears below:Explanation / Answer
1. Equivalent units of production = Units completed and transfered + Work in process at ending * % of completion
with respect to the relevant cost component
Materials = 31400 + 6400 * 75%
= 31400 + 4800 = 36200
Conversion = 31400 + 6400 * 50%
= 31400 + 3200 = 34600
Total = 36200 + 34600 = 70800
2. Cost per equivalent unit = Total Cost / No. of Units
Materials = $15642 + $63274 / 36200
= $2.18
Conversion = $7900 + $34312 / 34600
= $1.22
3. Units started and completed = Transfered to next department - Work in process at beginning
= 31400 - 7900 = 23500 units
4. No. The Manager should not be rewarded since in weighted average method, cost of prior period get mixed with cost of current period.
Therefore, cost of March is $1.80 and April is $2.30, average cost would be $2.05 which is less than $2.30.