Golden Ring Company produces two types of product: Large and Larger. Two work orders for two batches of the products are shown below, along with some additional cost information: $\begin{array} { l }
&\text { Large } & \text { Larger } \
&\text { Work Order } 10 & \text { Work Order } 11\
\text {Direct materials (actual costs) }&\$45,000&\$75,000\
\text { Applied conversion costs:}\
\text {Mixing }&?&?\
\text { Cooking } & \$ 12,000 & \$ 12,000 \
\text { Bottling } & \$ 10,000 & \$ 15,000 \\
\text { Batch size (bottles) } & 5,000 & 5,000
\end{array}$
In the Mixing Department, conversion costs are applied on the basis of direct labor hours. Budgeted conversion costs for the department for the year were $50,000 for labor and $125,000 for overhead. Budgeted direct labor hours were 2,500. It takes three minutes to mix the ingredients needed for each bottle.
Large (Work Order 10) and Larger (Work Order 11) flow through the Mixing Department first, then through the Cooking and Bottling departments.
What are Golden Ring Company's conversion costs applied to Large (Work Order 10) from the Mixing Department for each batch?
A)$35,000
B)$35
C)$175,000
D)$17,500

Question

Golden Ring Company produces two types of product: Large and Larger. Two work orders for two batches of the products are shown below, along with some additional cost information: $\begin{array} { l  }
&\text { Large } & \text { Larger } \
&\text { Work Order } 10 & \text { Work Order } 11\
\text {Direct materials (actual costs) }&\$45,000&\$75,000\
\text { Applied conversion costs:}\
\text {Mixing }&?&?\
\text { Cooking } & \$ 12,000 & \$ 12,000 \
\text { Bottling } & \$ 10,000 & \$ 15,000 \\
\text { Batch size (bottles) } & 5,000 & 5,000
\end{array}$
 In the Mixing Department, conversion costs are applied on the basis of direct labor hours. Budgeted conversion costs for the department for the year were $50,000 for labor and $125,000 for overhead. Budgeted direct labor hours were 2,500. It takes three minutes to mix the ingredients needed for each bottle.
Large (Work Order 10) and Larger (Work Order 11) flow through the Mixing Department first, then through the Cooking and Bottling departments.
What are Golden Ring Company's conversion costs applied to Large (Work Order 10) from the Mixing Department for each batch?
A)$35,000
B)$35
C)$175,000
D)$17,500

Quizplus · Accepted Answer

The conversion costs in the Mixing Department are applied based on direct labor hours. The total budgeted conversion costs for the department are $50,000 for labor plus $125,000 for overhead, totaling $175,000. The budgeted direct labor hours are 2,500, so the cost per labor hour is $175,000 / 2,500 = $70. Each bottle takes 3 minutes to mix, which is 0.05 hours (3/60). For a batch of 5,000 bottles, the total labor hours are 5,000 * 0.05 = 250 hours. Therefore, the conversion costs applied to Large (Work Order 10) for mixing are 250 hours * $70/hour = $17,500.

Golden Ring Company Produces Two Types of Product: Large and Larger