Cooperative San José of southern Sonora state in Mexico makes a unique syrup using cane sugar and local herbs. The syrup is sold in small bottles and is prized as a flavoring for drinks and for use in desserts. The bottles are sold for $12 each. The first stage in the production process is carried out in the Mixing Department, which removes foreign matter from the raw materials and mixes them in the proper proportions in large vats. The company uses the weighted-average method in its process costing system. A hastily prepared report for the Mixing Department for April appears below: Units to be accounted for: Work in process, April 1 (materials 90% complete; conversion 80% complete) 30,000 Started into production 200,000 Total units to be accounted for 230,000 Units accounted for as follows: Transferred to next department 190,000 Work in process, April 30 (materials 75% complete; conversion 60% complete) 40,000 Total units accounted for 230,000 Cost Reconciliation Cost to be accounted for: Work in process, April 1 $ 98,000 Cost added during the month 827,000 Total cost to be accounted for $ 925,000 Cost accounted for as follows: Work in process, April 30 $ 119,400 Transferred to next department 805,600 Total cost accounted for $ 925,000 The manager of the Mixing Department stated, “Materials prices jumped from about $2.50 per unit in March to $3 per unit in April, but due to good cost control I was able to hold our materials cost to less than $3 per unit for the month.” Should this manager be rewarded for good cost control?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter6: Process Costing

Section: Chapter Questions

Problem 38P: Healthway uses a process-costing system to compute the unit costs of the minerals that it produces....

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Cooperative San José of southern Sonora state in Mexico makes a unique syrup using cane sugar and local herbs. The syrup is sold in small bottles and is prized as a flavoring for drinks and for use in desserts. The bottles are sold for $12 each. The first stage in the production process is carried out in the Mixing Department, which removes foreign matter from the raw materials and mixes them in the proper proportions in large vats. The company uses the weighted-average method in its process costing system.

A hastily prepared report for the Mixing Department for April appears below:


Units to be accounted for:
Work in process, April 1 (materials 90% complete; conversion 80% complete)	30,000
Started into production	200,000
Total units to be accounted for	230,000
Units accounted for as follows:
Transferred to next department	190,000
Work in process, April 30 (materials 75% complete; conversion 60% complete)	40,000
Total units accounted for	230,000


Cost Reconciliation
Cost to be accounted for:
Work in process, April 1	$	98,000
Cost added during the month		827,000
Total cost to be accounted for	$	925,000
Cost accounted for as follows:
Work in process, April 30	$	119,400
Transferred to next department		805,600
Total cost accounted for	$	925,000

The manager of the Mixing Department stated, “Materials prices jumped from about $2.50 per unit in March to $3 per unit in April, but due to good cost control I was able to hold our materials cost to less than $3 per unit for the month.” Should this manager be rewarded for good cost control?

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