Organic Sugar Company at Ohio has six processing departments for refining sugar: Affination, Carbonatation, Decolorization, Boiling, Recovery, and Packaging. Conversion costs are added evenly throughout each process. Data from the month of August for the Recovery Department are as follows: $$\begin{array} { | l | r | }
\hline& { \text { Metric Tons } }\
\hline \text { Beginning Work-in-Process Inventory } &0 \
\hline \text { Started in production } & 20,500 \
\hline \text { Ending Work-in-Process Inventory } & 5,500 \
\hline
\end{array}$$ $$\begin{array} { | l | r | }
\hline & { \text { Costs } } \
\hline \text { Beginning Work-in-Process Inventory } & \$ 0 \
\hline \text { Costs added during August: } & \
\hline \text { Direct materials } & 500,000 \
\hline \text { Direct labor } & 250,000 \
\hline \text { Manufacturing overhead } & \underline { 125,000 } \
\hline \text { Total costs added during August } & \$ 875,000 \
\hline
\end{array}$$ The ending Work-in-Process Inventory is 100% and 95% complete with respect to direct materials and conversion costs respectively. How many metric tons of sugar were refined and transferred to the Packaging Department in August?

Question

Organic Sugar Company at Ohio has six processing departments for refining sugar: Affination, Carbonatation, Decolorization, Boiling, Recovery, and Packaging. Conversion costs are added evenly throughout each process. Data from the month of August for the Recovery Department are as follows: $$\begin{array} { | l | r | } 
\hline& { \text { Metric Tons } }\
\hline \text { Beginning Work-in-Process Inventory } &0  \
\hline \text { Started in production } & 20,500 \
\hline \text { Ending Work-in-Process Inventory } & 5,500 \
\hline
\end{array}$$ $$\begin{array} { | l | r | } 
\hline & { \text { Costs } } \
\hline \text { Beginning Work-in-Process Inventory } & \$ 0 \
\hline \text { Costs added during August: } & \
\hline \text { Direct materials } & 500,000 \
\hline \text { Direct labor } & 250,000 \
\hline \text { Manufacturing overhead } & \underline { 125,000 } \
\hline \text { Total costs added during August } & \$ 875,000 \
\hline
\end{array}$$ The ending Work-in-Process Inventory is 100% and 95% complete with respect to direct materials and conversion costs respectively. How many metric tons of sugar were refined and transferred to the Packaging Department in August?

Quizplus · Accepted Answer

To find the metric tons of sugar refined and transferred to the Packaging Department, we need to use the weighted average method for equivalent units.

First, let's calculate the equivalent units of direct materials and conversion costs:

Direct Materials:
20,500 (started) + 0 (beginning inventory) - 5,500 (ending inventory) = 15,000 equivalent units

Conversion Costs:
100% complete as to direct materials x 20,500 (started) = 20,500 equivalent units for direct materials
95% complete as to conversion costs x 20,500 (started) = 19,475 equivalent units for conversion costs

Total equivalent units = 15,000 (direct materials) + 19,475 (conversion costs) = 34,475 equivalent units

Next, we need to calculate the cost per equivalent unit:
Total cost added during August / Total equivalent units
$875,000 / 34,475 equivalent units = $25.36 per equivalent unit

Finally, we can calculate the cost of the work completed and transferred out:
Direct materials: 15,000 equivalent units x $25.36 per equivalent unit = $380,400 
Conversion costs: 19,475 equivalent units x $25.36 per equivalent unit = $495,195 
Total cost of work completed and transferred out: $380,400 + $495,195 = $875,595

Since all 20,500 metric tons were started and only 5,500 metric tons were left in ending inventory, 15,000 metric tons of sugar must have been refined and transferred to the Packaging Department in August. Therefore, the answer is C) 15,000 metric tons.

Organic Sugar Company at Ohio Has Six Processing Departments for Refining