Reference no: EM132978290
Question - Big Grape Vines Ltd (BGV) is a small independent organic certified winery in Kelowna, British Columbia. BGV has two production departments, Crushing and Fermenting, and Bottling. This question relates to the Bottling Department. For processing in the Bottling Department, goods are transferred in from the Crushing and Fermenting Department. BGV uses the weighted average method in its process-costing system.
In the Bottling Department, Direct Materials are added at two stages: material A is added at the 25% completion stage and material B is added at the 95% completion stage. Inspection occurs when units are 90% complete and conversion costs are incurred uniformly throughout the process.
The following data were recorded for Bottling Department in the month of May.
Units in beginning work-in-process inventory 42,000
% Completion of beginning work-in-process units 50%
Units transferred in from Crushing and Fermenting dept 105,000
Units completed and transferred out 120,000
Units in ending work-in-process inventory 20,000
% Completion of ending work-in-process units 96%
Costs related to opening inventory
Transferred-in costs $250,000
Direct material - A- costs 95,000
Conversion costs 155,000
Costs added during current period:
Transferred-in costs $720,000
Direct materials - A $410,000
Direct materials - B $600,000
Conversion costs $1,150,000
Normal spoilage is considered to be 4% of the units that pass inspection. The company pro-rates normal spoilage between cost of goods manufactured and ending work-in-process.
Required -
1. Discuss the differences between job costing and process costing. Provide an example of an industry that often uses process-costing systems.
2. Prepare a schedule of equivalent units for all cost categories.
3. Compute the cost per equivalent unit for each cost category.
4. Prepare a production cost report for the Bottling Department, in good form. The report should show the distribution of costs between all categories for all costs. Your report should display the total cost of goods manufactured in the Bottling Department for the month of May, the total amount of any abnormal spoilage and the ending balance in the work-in-process inventory account at the end of May.
5. There were no units in opening finished goods inventory at the beginning of May. At the end of May, there were 5,000 units in finished goods inventory. What is the ending balance in the finished goods inventory account on May 31st?