Adam’s Apple Company makes homemade applesauce using Grandma Adam’s special reci

Question

Adam’s Apple Company makes homemade applesauce using Grandma Adam’s special recipe.   The company uses a FIFO process cost system.   The process starts in the Kettle Room where apples are cored, cut and added to the Kettles along with Grandma’s special spices.   After several hours of slow simmering, the sauce is cooled as it moves to the Canning department where the sauce is poured into jars and sealed.    After the jars are sealed they move to the packing department where they are placed into boxes and moved to finished goods where they are ready for sale.    During the month of March the company sold 5,000 boxes of sauce with each box holding a dozen jars. A jar of sauce sells for $4.00.

Create the WIPs for each department indicating the Cost of each jar as it moves through the process.

Using the following information, determine the Gross Profit for the month of March.

Kettle Department:        Beginning Balance 16000 at 90% complete with Costs of $13,600

                                             Ending Inventory 4000 jars at 20% completion

                                             DM used $ 21,280

                                             DL used $ 8,000

                                             FOH allocated $ 6,560

Canning Department:    Beginning Balance 28,000 at 30% complete with costs of $33,600

                                             Jars Started 50,000

                                             Jars Transferred to Packing 62,000

                                             Ending Inventory was 40% completed

                                             DM used $ 30,000        

                                             DL used $ 14,800

                                             FOH allocated $ 19,500

Packing Department:     Beginning Balance 14,000 at 75% complete with costs of $18,990

                                             Ending Inventory 23,000 jars at 10% completed

                                             DM used $ 14000

                                             DL used $ 5600

                                             FOH allocated $ 11000

Finished Good Department: Beginning Balance 21,500 jars with costs of $ 47,515

                                                            DL used $ 18,625

                                                            FOH allocated $11,175

Explanation / Answer

Calculation of WIP

Kettle department

Total cost = Material cost + Labour cost + Overhead

= $38540

No. of completed units = 16000*10% + 50000*100% + 4000*20%

= 52400

Cost/unit = $38540/52400 = 0.735

WIP = 0.735*800 = 588

Canning department

Total cost = 64300

Total no. of jars worked on = 28000*70% + 34000*100% + 16000*40%

= 60000

Cost/unit = 64300/60000 = 1.072

WIP = 1.072*(16000*40%)

= 6861

Packing department

Total cost = 14000+5600+11000 = 30600

No. of jars worked on = 14000*25%+39000*100%+23000*10%

= 44800

Cost/unit = 30600/44800 = 0.683

WIP = 0.683*2300 = 1571

Calculatio of gross profit

Gross profit = Sales + closing stock - COGS - openingstock

   = 60000*4 + 9407-160540-113705

   = (24838)

Opening stock

W-I-P

Kettle department = 13600

canning department = 33600

Packing department = 18990    $66190

Finished goods $47515

Closing Stock

WIP

Kettle department = 588

canning department = 6861

packing department = 1571    9020

Finished goods (29800/38500)*500 = 387

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