Golden Ring Company produces two types of product: Large and Larger. Two work or

ID: 2433013 • Letter: G

Question

Golden Ring Company produces two types of product: Large and Larger. Two work orders for two batches of the products are shown below, along with some additional cost information:

In the Mixing Department, conversion costs are applied on the basis of direct labor hours. Budgeted conversion costs for the department for the year were $50,000 for labor and $125,000 for overhead. Budgeted direct labor hours were 2,500. It takes three minutes to mix the ingredients needed for each bottle.

Large (Work Order 10) and Larger (Work Order 11) flow through the Mixing Department first, then through the Cooking and Bottling departments.

What is Golden Ring Company's amount transferred from the Bottling Department to Finished Goods for Work Order 10?

a.$45,000

b.$67,000

c.$39,500

d.$84,500

Large Larger Work Order 10 Work Order 11 Direct materials (actual costs) $45,000 $75,000 Applied conversion costs: Mixing ? ? Cooking $12,000 $12,000 Bottling $10,000 $15,000 Batch size (bottles) 5,000 5,000

Explanation / Answer

Solution: $84,500

Working:

Conversion cost rate (Work order 10- Mixing) = ($125,000 + $50,000)/2,500 = $175,000/ 2500 = $70 per DLH

Applied conversion costs = $70 * 5,000 * 3/60 = $17,500

Direct materials

45,000

Applied conversion costs

Mixing

17,500

Cooking

12,000

Bottling

10,000

84,500