Myer’s Treats makes institutional cakes. Finished cakes must pass through two de

Question

Myer’s Treats makes institutional cakes. Finished cakes must pass through two departments: Mixing and Baking. Vats of cake batter are processed in the Mixing Department and then transferred to the Baking Department, where individual cakes are baked, cooled, and frosted. There were 500 gallons of partially mixed batter in the Mixing Department’s inventory on August 1. The batter was 100 percent complete with respect to direct materials, but only 30 percent complete with respect to conversion. Manufacturing costs assigned to the inventory carried forward from July totaled $1,800. During August, the Mixing Department started 11,500 new gallons of batter. August direct materials costs in the Mixing Department totaled $34,500, and conversion costs totaled $22,800. Ending inventory on August 31 consisted of 600 partially mixed gallons of batter. These units were 100 percent complete with respect to direct materials, but only 25 percent complete with respect to conversion. a. Prepare a schedule showing: (1) gallons of mix transferred from the Mixing Department to the Baking Department in August, and (2) gallons of mix started and completed by the Mixing Department in August. b. Compute the equivalent units of input resources for the Mixing Department in August. c. Compute the cost per equivalent unit of input resource for the Mixing Department in August. d. Prepare the summary journal entry required to transfer the cost of fully mixed batter from the Mixing Department to the Baking Department in August. e. Compute the total cost assigned to the Mixing Department's ending inventory on August 31.

Explanation / Answer

Statement 1: Equivalent unir calculation: Inputs Details Outputs Equivalent units Materials Equivalent units: converstion % Units % Units 500 Stock Opening 11,500 Introduced Units completed: Opening stock 500 nil 0 70% 350 Introduced 10,900 100% 10,900 100% 10,900 Ending stock 600 100% 600 25% 150 12,000 Total 12,000 11,500 11,400 Statement 2: Computation of cost per equivalent units Details Calculation Result Material cost $34,500/11,500 $3 Conversion cost $22,800/11,400 $2 Calculation of cost of units completed and transferred to next process: Details Amount Amount Cost of opening stock completed - Cost incurred in July $1,800 -Conversion cost in August (350 x $2) $700 $2,500 Cost of units introduced and completed: - Material cost 10,900 units x $3 $32,700 -Conversion cost 10,900 units x $2 $21,800 $54,500 Total cost of 11,400 units transferred to baking Department $57,000 Journal entry for transferring thiese completed units in next process is- Debit Credit Baking Department................................ $57,000 $57,000 Mixing Department.............................. ( Cost of 11,400 units completed in mixing department now transferred to Baking Department) Answer of part (b): Calculation of value of Ending Stock: Details Amount Material cost (600 units x $3) $1,800 Conversion cost ( 150 unis x $2) $300 Total cost of ending inventory $2,100

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