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 is Golden Ring Company's amount transferred from the Mixing Department to the Cooking Department for Work Order 10?
A)$45,000
B)$62,500
C)$39,500
D)$84,500

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 is Golden Ring Company's amount transferred from the Mixing Department to the Cooking Department for Work Order 10?
A)$45,000
B)$62,500
C)$39,500
D)$84,500

Quizplus · Accepted Answer

The conversion cost rate for the Mixing Department is calculated as total budgeted conversion costs ($50,000 labor + $125,000 overhead) divided by budgeted direct labor hours (2,500), which equals $70 per hour. Each bottle takes 3 minutes to mix, so for 5,000 bottles, the total hours are (5,000 bottles * 3 minutes) / 60 = 250 hours. The applied conversion cost for Work Order 10 is 250 hours * $70/hour = $17,500. Adding the direct materials cost of $45,000, the total amount transferred is $45,000 + $17,500 = $62,500.

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