Reference no: EM132506946

Digo Co. makes a trail mix in two departments: Roasting and Blending. Direct materials are added at the beginning of each process, and conversion costs are added evenly throughout the process. The company uses the FIFO method of process costing. During October, the Roasting department completed and transferred 22,200 units to the Blending department. Of the units completed, 3,000 were from beginning inventory and the remaining 19,200 were started and completed during the month. Beginning work in process was 100% complete with respect to direct materials and 40% complete with respect to conversion. The company has 2,400 units (100% complete with respect to direct materials and 80% complete with respect to conversion) in process at month-end. Information on the Roasting department's costs of beginning work in process inventory and costs added during the month follows.

Beginning WIP inventory:

Direct Materials : $9,900 :Conversion : 110,970

Added during the month : Direct Materials : 248,400 :Conversion : 1,082,970

Question 1: Prepare the Roasting department process cost summary for October using the FIFO method.

Question 2: Prepare the journal entry dated October 31 to transfer the cost of completed units to the Blending department.

Question 3: The company provides incentives to department managers by paying monthly bonuses based on the success in controlling costs per equivalent unit of production. Assume that production department underestimates the percentage of completion for units in ending inventory with the result that its equivalent units of production for October are understated. Will this error increase or decrease the October bonuses paid?