Egyptian Spa produces two different spa products: Relax and Refresh. The company

Question

Egyptian Spa produces two different spa products: Relax and Refresh. The company uses three operations to manufacture the products: mixing, blending, and packaging. Because of the materials used, Relax is produced in powder form in the mixing department, then transferred to the blending department, and finally on to packaging. Refresh undergoes no mixing; it is produced in liquid form in the blending department and then transferred to packaging. Egyptian Spa applies conversion costs based on labor-hours in the mixing department. It takes 2 minutes to mix the ingredients for a container of Relax. Conversion costs are applied based on the number of containers in the blending departments and on the basis of machine-hours in the packaging department. It takes .5 minutes of machine time to fill a container, regardless of the product. The budgeted number of containers and expected direct materials cost for each product are as follows:

Relax Number of Containers 24,000 Refresh Number of Containers 18,000

Direct materials cost Relax- $17,160.00 Refresh- $13,140.00

The budgeted conversion costs for each department for May are as follows:

Mixing

Blending Number of containers 20,160

Packaging Machine-hours 2800

Requirement 1: Calculate the conversion cost rates for each department

Requirement 2: Calculate the cost of goods manufactured for Relax and Refresh for the month of May

Requirement 3: Calculate the cost per container for each product for the month of May

Please show work and calculations

Department Allocation of conversion costs budgeted conversion cost

Mixing

Direct labor-costs 11,760.00 Blending Number of Containers 20160 Packaging Machine-hours 2800

Explanation / Answer

ans 1 RelAX Refresh Depatment Conversion cost C Activity driver A Conversion cost rate F=C/A Activity driver D Cost allocated D*F Activity driver G Cost alloacted G*F Mixing $11,760 direct labor hours 1400 $8.40 800 $6,720 600 $5,040 (24000*2/60)+(18000*2/60) (24000*2/60) (18000*2/60) Blending $20,160 no. of containers 42000 $0.48 24000 $11,520 18000 $8,640 (24000+18000) Packaging 2800 no. of machine hours 350 8 200 $1,600 150 $1,200 (24000*.5/60)+(18000*.5/60) (24000*.5/60) (18000*.5/60) Total $19,840 $14,880 Ans 2 Cost of Good Manufactured Relax Refresh Direct Material $17,160 $13,140 Conversion cost $19,840 $14,880 Cost of Good Manufactured $37,000 $28,020 ans 3 Cost per container Cost of Good Manufactured $37,000 $28,020 No. of containers 24000 18000 Cost per container $1.54 $1.56

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