Concept explainers
Equivalent units of production
Kellogg Company manufactures cold cereal products, such as Frosted Flakes. Assume that the inventory in process on March 1 for the Packing Department included 1,200 pounds of cereal in the packing machine hopper (enough for 800 24-oz. boxes) and 800 empty 24-oz. boxes held in the package carousel of the packing machine. During March, 65,400 boxes of 24-oz. cereal were packaged. Conversion costs are incurred when a box is filled with cereal. On March 31, the packing machine hopper held 900 pounds of cereal, and the package carousel held 600 empty 24-oz. (1½-pound) boxes. Assume that once a box is filled with cereal, it is immediately transferred to the finished goods warehouse.
Determine the equivalent units of production for cereal, boxes, and conversion costs for March. An equivalent unit is defined as “pounds” for cereal and “24-oz. boxes” for boxes and conversion costs.
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Managerial Accounting
- Transferred-In Cost Powers Inc. produces a protein drink. The product is sold by the gallon. The company has two departments: mixing and bottling. For August, the bottling department had 70,000 gallons in beginning inventory (with transferred-in costs of 283,000) and completed 262,500 gallons during the month. Further, the mixing department completed and transferred out 240,000 gallons at a cost of 957,000 in August. Required: 1. Prepare a physical flow schedule for the bottling department. 2. Calculate equivalent units for the transferred-in category. 3. Calculate the unit cost for the transferred-in category.arrow_forwardDura-Conduit Corporation manufactures plastic conduit that is used in the cable industry. A conduit is a tube that encircles and protects the underground cable. In the process for making the plastic conduit, called extrusion, the melted plastic (resin) is pressed through a die to form a tube. Scrap is produced in this process. Information from the cost of production reports for three months is as follows, assuming that inventory remains constant: Assume that there is one-half pound of resin per foot of the finished product. a. Determine the resin materials cost per foot of finished product for each month. Round to the nearest whole cent. b. Determine the ratio of the number of resin pounds output in conduit by the number of pounds input into the process for each month. Round percentages to one decimal place. c. Interpret the resin materials cost per foot for the three months. Use the information in (a) and (b) to explain what is happening. d. Determine the conversion cost per foot of finished product for each month and interpret the result.arrow_forwardTransferred-In Cost Vigor Inc. produces an energy drink. The product is sold by the quart. The company has two departments: mixing and bottling. For May, the bottling department had 30,000 quarts in beginning inventory (with transferred-in costs of 63,000) and completed 140,000 quarts during the month. Further, the mixing department completed and transferred out 120,000 gallons at a cost of 237,000 in May. Required: 1. Prepare a physical flow schedule for the bottling department. 2. Calculate equivalent units for the transferred-in category. 3. Calculate the unit cost for the transferred-in category.arrow_forward
- Basic Cost Flows Gardner Company produces 18-ounce boxes of a wheat cereal in three departments: mixing, cooking, and packaging. During August, Gardner produced 250,000 boxes with the following costs: Required: 1. Calculate the costs transferred out of each department. 2. Prepare journal entries that reflect these cost transfers.arrow_forwardBasic Cost Flows Hardy Company produces 18-ounce boxes of a rolled oat cereal in three departments: mixing, cooking, and packaging. During September, Hardy produced 200,000 boxes with the following costs: Required: 1. Calculate the costs transferred out of each department. 2. Prepare journal entries that reflect these cost transfers.arrow_forwardFresno Industries Inc. manufactures and sells high-quality camping tents. The company began operations on January 1 and operated at 100% of capacity (150,000 units) during the first month, creating an ending inventory of 20,000 units. During February, the company produced 130,000 units during the month but sold 150,000 units at 500 per unit. The February manufacturing costs and selling and administrative expenses were as follows: a. Prepare an income statement according to the absorption costing concept for the month ending February 28. b. Prepare an income statement according to the variable costing concept for for the month ending February 28. c. What is the reason for the difference in the amount of operating income reported in (a) and (b)?arrow_forward
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