Problem - Sally's Sauces is a small company that produces hot sauces using two sequential production departments: the Mixing Department and the Bottling Department. The following information was found for Sally's Sauces' first production process, the Mixing Department.
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Sally's Sauces Mixing Department Month Ended September 30
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Information about units:
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Beginning work in process, September 1
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500 units
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Started in production during September
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1,000 units
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Completed and transferred to Bottling Department during September
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800 units
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Ending work in process, September 30 (25% complete as to direct materials, 60% complete as to conversion costs)
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700 units
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Information about costs:
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Beginning work in process, September 1 (consists of $850 of direct materials cost and $1850 of conversion costs)
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$2,700
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Direct materials used in September
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$5,000
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Conversion costs incurred in September
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$16,450
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During the month of September, the Mixing Department used $10,350 of direct labor per the labor time records and 305 machine hours. Sally's Sauces uses a predetermined manufacturing overhead rate of $20.00 per machine hour.
Use the five-step process costing system to calculate the cost that should be assigned to units that have been completed and transferred out to the next department and the units still in work in process inventory. The journal entries for the Mixing Department for direct materials, direct labor and manufacturing overhead as well as the journal entry required at the end of the period to transfer costs to the next department, the Bottling Department, should also be prepared.
Requirements:
1. Summarize the flow of physical units and compute output in terms of equivalent units.
2. Summarize total costs to account for.
3. Compute the cost per equivalent unit.
4. Assign total costs to units completed and to units in ending work in process inventory.
5. Prepare the journal entries for the Mixing Department for direct materials, direct labor and manufacturing overhead as well as the journal entry required at the end of the period to transfer costs to the next department, the Bottling Department.