7) Paulson Winery in Napa Valley, California has 2 departments: Fermenting and p

Question

7) Paulson Winery in Napa Valley, California has 2 departments: Fermenting and packaging. Direct materials are added at the beginning of the fermenting process and at the end of the packaging process. Conversion costs are added evenly throughout each process. Data from the month of MArch for the fermenting department is as follows:

Gallons:

beginning work in process inventor-0

started production- 7800 gallons

completed and transferred out to packaging in march- 6400 gallons

ending work in process inventory (80% of the way through fermenting process)- 1400 gallons

Costs:

beginning work in process inventory- $0

costs added during march:

direct materials- $9360

direct labor- $3662

manufacturing overhead- $4610

Total costs added in march- $17632

Requirements:

R1- draw a time line for the fermenting process

R2- use the time line to help you compute the equivalent units for direct materials and for conversion costs

R3- compute the total costs of the units:

A-completed and transferred out to the packaging department

B- in the fermenting department ending work in process inventory

8) Refer to the data and your answers from exercise 7

Requirements:

R1-present the journal entires to record the assignment of Direct materials and direct labor and the allocation of manufacturing overhead to the fermenting department. Also, give the journal entry to record the cost of the gallons completed and transferred out to the packaging department

R2-post the journal entries to the work in process inventory--- fermenting T-account. What is the ending balance?

R3- What is the average cost pergallon transferred out of fermenting in packaging? Why would Paulson's Winery's managers to know this cost?

Explanation / Answer

R1 Timeline for fermenting process Add Direct Materials and Direct Labor Transfer to packaging department R2 Transferred out 6400 gallons End WIP Inventory 1400 * 80% = 1120 gallons Equivalent Units Direct Materials 7520 gallons Transferred out 6400 gallons End WIP Inventory 1400 gallons Equivalent Units Conversion 8800 gallons R3 A. Total Costs Transferred Units Total Cost 9360 + 3662 + 4610 = 17632 / 7800 gallons = $2.26/gallon X 6400 gallons transferred = $14467 B. Total Costs Ending WIP Units $2.26/gallon X 1400 gallons = $3164 R1 Work In Process Inventory - Fermenting $9360 Direct Materials $9360 Work In Process Inventory- Fermenting $3662 Direct Labor $3662 Work In Process Inventory - Fermenting $4610 Manufacturing Overhead $4610 Assign DM, DL and Manufacturing Overhead to Fermenting Department Work In Process - Packaging $14467 Work In Process Inventory - Fermenting $14467 Total Cost 9360 + 3662 + 4610 = 17632 / 7800 gallons = $2.26/gallon X 6400 gallons transferred = $14467 R2 Work in Process Inventory - Fermenting Debit (Left Side of T-account): $9360 + $3662 + $4610 Credit (Right Side of T-account): $14467 Ending Balance = 17362 - 14467 = $2895 R3 Average Cost/Gallon: Total Cost 9360 + 3662 + 4610 = 17632 / 7800 gallons = $2.26/gallon Managers would want to know this to determine the cost of Inventory transferred from the fermenting department to the packaging department.

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