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application of Process Costing of a manufacturing company

Objective:  Demonstrate application of Process Costing of a manufacturing company including the following:

Determine Department WIP inventory

Calculation of Equivalent Units

Determine Finished Goods Inventory

Calculation of COGS

Determination of Gross Profit

Adam’s Apple Company makes homemade applesauce using Grandma Adam’s special recipe.   The company uses a FIFO process cost system.   The process starts in the Kettle Room where apples are cored, cut and added to the Kettles along with Grandma’s special spices.   After several hours of slow simmering, the sauce is cooled as it moves to the Canning department where the sauce is poured into jars and sealed.    After the jars are sealed they move to the packing department where they are placed into boxes and moved to finished goods where they are ready for sale.    During the month of March the company sold 5,000 boxes of sauce with each box holding a dozen jars. A jar of sauce sells for $4.00.

1) Create the WIPs for each department indicating the Cost of each jar as it moves through the process.

2) Using the following information, determine the Gross Profit for the month of March.

Kettle Department: Beginning Balance  16000 at 90% complete with Costs of $13,600

                              Ending Inventory 4000 jars at 20% completion

                              DM used  $ 21,280

                              DL  used  $ 8,000

                              FOH allocated $  6,560

Canning Department:        Beginning Balance 28,000 at 30% complete with costs of $33,600

                              Jars Started  50,000

                              Jars Transferred to Packing 62,000

                              Ending Inventory was 40% completed

                              DM used $  30,000

                              DL used  $  14,800

                              FOH allocated $ 19,500

Packing Department:         Beginning Balance 14,000 at 75% complete with costs of $18,990

                              Ending Inventory  23,000 jars at 10% completed

                              DM used $ 14000

                              DL used  $ 5600

                              FOH allocated $ 11000

Finished Good Department: Beginning Balance 21,500 jars with costs of $ 47,515

                                        DL used $ 18,625

                                                FOH allocated $11,175


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