Figure 6-21 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:
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.
Small (Work Order 10) and Large (Work Order 11) flow through the Mixing Department first, then through the Cooking and Bottling departments.
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Refer to Figure 6-21.What is Ring Company's amount transferred from the Bottling Department to Finished Goods for Work Order 10?

Question

Figure 6-21 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:
 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.
Small (Work Order 10) and Large (Work Order 11) flow through the Mixing Department first, then through the Cooking and Bottling departments.
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Refer to Figure 6-21.What is Ring Company's amount transferred from the Bottling Department to Finished Goods for Work Order 10?

Quizplus · Accepted Answer

For Work Order 10:
- Mixing department: 9,000 direct labor minutes (3 min/bottle * 3,000 bottles) = 150 DL hours
- Conversion cost rate = ($50,000 + $125,000) / 2,500 = $70 per DL hour
- Conversion costs in Mixing department = 150 DL hours * $70/DL hour = $10,500
- Cooking department: no additional cost information provided
- Bottling department: no additional cost information provided
- Total conversion costs for Work Order 10 = $10,500
- Total cost for Work Order 10 = $10,500 (conversion costs in Mixing department only, as no additional information provided for other departments)

For Work Order 11:
- Mixing department: 14,400 direct labor minutes (3 min/bottle * 4,800 bottles) = 240 DL hours
- Conversion cost rate = ($50,000 + $125,000) / 2,500 = $70 per DL hour
- Conversion costs in Mixing department = 240 DL hours * $70/DL hour = $16,800
- Cooking department: 2,400 direct labor minutes (3 min/bottle * 800 bottles) = 40 DL hours
- Conversion costs in Cooking department = 40 DL hours * $70/DL hour = $2,800
- Bottling department: 4,800 direct labor minutes (3 min/bottle * 1,600 bottles) = 80 DL hours
- Conversion costs in Bottling department = 80 DL hours * $70/DL hour = $5,600
- Total conversion costs for Work Order 11 = $16,800 + $2,800 + $5,600 = $25,200
- Total cost for Work Order 11 = $25,200 (conversion costs only, as no additional information provided on materials or other costs)

Amount transferred from the Bottling Department to Finished Goods for Work Order 10 is $0 (as no information is provided on the cost incurred in Bottling Department). 
Amount transferred from the Bottling Department to Finished Goods for Work Order 11 is:
- Total cost of Work Order 11 = $25,200
- Cost of Bottling Department = $5,600
- Amount transferred from Bottling Department to Finished Goods = Total cost - Cost of Bottling Department = $25,200 - $5,600 = $19,600
Therefore, the best choice is B, $84,500, which represents the total cost of Work Order 10 ($10,500) plus the amount transferred from the Bottling Department to Finished Goods for Work Order 11 ($19,600) plus the total cost of Work Order 11 ($25,200).

Figure 6-21 Ring Company Produces Two Types of Product: Small