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Benson Pharmaceuticals uses a process-costing system to compute the unit costs of the over-the-counter cold remedies that it produces. It has three departments: mixing, encapsulating, and bottling. In mixing, the ingredients for the cold capsules are measured, sifted, and blended (with materials assumed to be uniformly added throughout the process). The mix is transferred out in gallon containers. The encapsulating department takes the powdered mix and places it in capsules (which are necessarily added at the beginning of the process). One gallon of powdered mix converts into 1,500 capsules. After the capsules are filled and polished, they are transferred to bottling, where they are placed in bottles that are then affixed with a safety seal, lid, and label. Each bottle receives 50 capsules. During March, the following results are available for the first two departments: Overhead in both departments is applied as a percentage of direct labor costs. In the mixing department, overhead is 200% of direct labor. In the encapsulating department, the overhead rate is 150% of direct labor. Required: 1. Prepare a production report for the mixing department using the weighted average method. Follow the five steps outlined in the chapter. ( Note : Round to two decimal places for the unit cost.) 2. Prepare a production report for the encapsulating department using the weighted average method. Follow the five steps outlined in the chapter. ( Note : Round to four decimal places for the unit cost.) 3. CONCEPTUAL CONNECTION Explain why the weighted average method is easier to use than FIFO. Explain when weighted average will give about the same results as FIFO.

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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773
BuyFind

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773

Solutions

Chapter
Section
Chapter 6, Problem 67P
Textbook Problem
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Benson Pharmaceuticals uses a process-costing system to compute the unit costs of the over-the-counter cold remedies that it produces. It has three departments: mixing, encapsulating, and bottling. In mixing, the ingredients for the cold capsules are measured, sifted, and blended (with materials assumed to be uniformly added throughout the process). The mix is transferred out in gallon containers. The encapsulating department takes the powdered mix and places it in capsules (which are necessarily added at the beginning of the process). One gallon of powdered mix converts into 1,500 capsules. After the capsules are filled and polished, they are transferred to bottling, where they are placed in bottles that are then affixed with a safety seal, lid, and label. Each bottle receives 50 capsules.

During March, the following results are available for the first two departments:

Chapter 6, Problem 67P, Benson Pharmaceuticals uses a process-costing system to compute the unit costs of the

Overhead in both departments is applied as a percentage of direct labor costs. In the mixing department, overhead is 200% of direct labor. In the encapsulating department, the overhead rate is 150% of direct labor.

Required:

  1. 1. Prepare a production report for the mixing department using the weighted average method. Follow the five steps outlined in the chapter. (Note: Round to two decimal places for the unit cost.)
  2. 2. Prepare a production report for the encapsulating department using the weighted average method. Follow the five steps outlined in the chapter. (Note: Round to four decimal places for the unit cost.)
  3. 3. CONCEPTUAL CONNECTION Explain why the weighted average method is easier to use than FIFO. Explain when weighted average will give about the same results as FIFO.

Expert Solution

1.

To determine

Present a production report for the mixing department using weighted average method.

Explanation of Solution

Weighted Average Method:

Weighted average method is an inventory valuation method. In this method, cost is divided by equivalent units to obtain unit cost. This unit cost is used to value the inventory units.

Step 1: Physical flow analysis:

ParticularsUnits
Units to account for: 
Units in beginning WIP10
Add: Units started during the period1150
Units to account for160
Units accounted for: 
Units completed and transferred140
Add: Units in ending WIP20
Units accounted for160

Table (1)

Step 2: Computation of equivalent units:

ParticularsUnits
Units completed and transferred140
Equivalent units from ending inventory (20×50%)10
Equivalent units150

Table (2)

Step 3: Computation of unit cost:

ParticularsAmount ($)
Cost of beginning inventory: 
Material252
Labor282
Overhead (200%×$282)564
Total cost of beginning inventory (A)1,098
Cost incurred: 
Material3,636
Labor4,618
Overhead (200%×$4,618)9,236
Total cost incurred (B)17,490
Total manufacturing cost (A+B)18,588
Unit cost (TotalmanufacturingcostEquivalentunits)

($18,588150)

123

Expert Solution

2.

To determine

Present a production report for the encapsulating department using weighted average method.

Expert Solution

3.

To determine

Discuss whether or not weighted average method is easier than FIFO. Also, discuss the situation in which weighted average will give about the same results as FIFO.

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Chapter 6 Solutions

Managerial Accounting: The Cornerstone of Business Decision-Making
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