Management would like some additional information about Cooperative San José’s o

Question

Management would like some additional information about Cooperative San José’s operations.

  

What were the costs per equivalent unit for the month? The beginning inventory consisted of the following costs: materials, $22,989; and conversion cost, $10,864. The costs added during the month consisted of: materials, $74,928; and conversion cost, $35,500. (Round your answers to 2 decimal places.)

  

How many of the units transferred to the next department were started and completed during the month?

  

The manager of the Mixing Department stated, “Materials prices jumped from about $2.10 per unit in March to $2.60 per unit in April, but due to good cost control I was able to hold our materials cost to less than $2.60 per unit for the month.” Should this manager be rewarded for good cost control?

Yes

No

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.

  Units to be accounted for:      Work in process, April 1 (materials 90%
         complete; conversion 80% complete) 9,700         Started into production 31,900      Total units to be accounted for 41,600      Units accounted for as follows:      Transferred to next department 27,600         Work in process, April 30 (materials 75%
         complete; conversion 50% complete) 14,000      Total units accounted for 41,600   

Explanation / Answer

1. Equivalent units of production:

2. Cost per equivalent unit for the month:

3.

4. No, the manager should not be rewarded for good cost control.The Mixing department's low unit cost for April occured because the costs of the prior month have been averaged with April's costs. This is the major criticism of the weighted average method.

Materials Conversion Transferred to next department 27,600 27,600 Ending work in process: Materials: 14,000 units * 75% complete 10,500 Conversion: 14,000 units * 50% complete 7,000 Equivalent units of production 38,100 34,600

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