Question

Munoz Corporation makes a health beverage named Munoz that is manufactured in a two-stage production process. The drink is first created in the Conversion Department where material ingredients (natural juices, supplements, preservatives, etc.) are combined. On July 1, 2018, the company had a sufficient quantity of partially completed beverage mix in the Conversion Department to make 58,000 containers of Munoz. This beginning inventory had a cost of $99,680. During July, the company added ingredients necessary to make 240,000 containers of Munoz. The cost of these ingredients was $405,000. During July, liquid mix representing 200,000 containers of the beverage was transferred to the Finishing Department. The beverage mix is poured into containers and packaged for shipment in the Finishing Department. Beverage that remained in the Conversion Department at the end of July was 30 percent complete. At the beginning of July the Finishing Department had 12,000 containers of beverage mix. The cost of this mix was $26,000. The department added $49,400 of manufacturing costs (materials, labor, and overhead) during July. During July, 145,000 containers of Munoz were completed. The ending inventory for this department was 40 percent complete at the end of July.

Required

1. Prepare a Cost of Production Report for the Conversion Department for July.

2. Prepare a Cost of Production Report for the Finishing Department for July.

3. If 98,000 containers of Munoz are sold in July for $568,400, determine the company's gross margin for July.

Answer 1

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you.
a.
Cost of Production Report
Conversion Department
For the month ended July 31, 2018
Equivalent Units
Quantities:	Actual Units	Equivalent Units
Beginning inventory	58,000
Units added to production	240,000
Total to be accounted for	298,000
Transferred to the finishing department	200,000	x 100%	200,000
Ending inventory	98,000	x    30%	29,400
Total accounted for	298,000		229,400
Cost per Unit
Beginning inventory	$       99,680
Cost added to production	$     405,000
Total to be accounted for	$     504,680
Cost per unit	$504,680	÷ 229,400	$                  2.20	per EU
Cost Allocation
To the finishing department (200,000 units x $2.20)			$            440,000
To ending WIP inventory (29,400 EQ units x $2.20)			$              64,680
Total allocated cost			$            504,680
b.
Cost of Production Report
Finishing Department
For the month ended July 31, 2018
Equivalent Units
Quantities:	Actual Units		Equivalent Units
Beginning inventory	12,000
Units added to production (from Conversion)	200,000
Total to be accounted for	212,000
Transferred to the finished goods invent.	145,000		x 100%	145,000
Ending inventory	67,000		x    40%	26,800
Total accounted for	212,000			171,800
Cost per Unit
Beginning inventory	$       26,000
Cost transferred In	$     440,000
Cost added to production	$       49,400
Total to be accounted for	$     515,400
Cost per unit	$515,400	÷ 171,800		$         3.00
Cost Allocation
To the finished goods inv. (145,000 units x $3.00)				$   435,000
To ending WIP inventory (26,800 EQ units x $3.00)				$     80,400
Total allocated cost				$   515,400