Ring Company produces two types of product: Small and Large. Two work orders for two batches of the products are shown below, along with some additional cost information:
$\begin{array}{lcc}
&\text { Small }&\text { Large } \
&\text {Work Order } 10&\text { Work Order } 11\
\hline\text { Direct materials (actual costs) } & \$ 45,000 & \$ 75,000 \
\text { Applied conversion costs: } & & \
\text { Mixing } &?& ? \
\text { Cooking } & \$ 12,000 & \$ 12,000 \
\text { Bottling } & \$ 10,000 & \$ 15,000 \\
\text { Batch size (bottles) }& 5,000 & 5,000
\end{array}$
In the Mixing Department,conversion costs are applied on the basis of direct labour hours.Budgeted conversion costs for the department for the year were $50,000 for labour and $125,000 for overhead.Budgeted direct labour hours were 2,500.It takes three minutes to mix the ingredients needed for each bottle.
Small (Work Order 10)and Large (Work Order 11)flow through the Mixing Department first,then through the Cooking and Bottling departments.
-Refer to the figure.What is Ring Company's amount transferred from the Mixing Department to the Bottling Department for Work Order 10?

Question

Ring Company produces two types of product: Small and Large. Two work orders for two batches of the products are shown below, along with some additional cost information:
$\begin{array}{lcc}
&\text { Small }&\text { Large } \
&\text {Work Order } 10&\text { Work Order } 11\
\hline\text { Direct materials (actual costs) } & \$ 45,000 & \$ 75,000 \
\text { Applied conversion costs: } & & \
\text { Mixing } &?& ? \
\text { Cooking } & \$ 12,000  & \$ 12,000 \
\text { Bottling } & \$ 10,000 & \$ 15,000 \\
\text { Batch size (bottles) }& 5,000 & 5,000
\end{array}$
 In the Mixing Department,conversion costs are applied on the basis of direct labour hours.Budgeted conversion costs for the department for the year were $50,000 for labour and $125,000 for overhead.Budgeted direct labour hours were 2,500.It takes three minutes to mix the ingredients needed for each bottle.
Small (Work Order 10)and Large (Work Order 11)flow through the Mixing Department first,then through the Cooking and Bottling departments.
-Refer to the figure.What is Ring Company's amount transferred from the Mixing Department to the Bottling Department for Work Order 10?

Quizplus · Accepted Answer

The conversion cost rate is calculated as total budgeted conversion costs ($50,000 + $125,000) divided by budgeted direct labour hours (2,500), which equals $70 per hour. For Work Order 10, 5,000 bottles require 3 minutes each, totaling 15,000 minutes or 250 hours. The conversion cost for mixing is 250 hours * $70/hour = $17,500. Adding direct materials ($45,000) and cooking ($12,000) and bottling ($10,000) costs, the total is $84,500. However, the question asks for the amount transferred from Mixing to Bottling, which includes only direct materials and mixing costs: $45,000 + $17,500 = $62,500.

Ring Company Produces Two Types of Product: Small and Large