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Appendix: Normal and Abnormal Spoilage in Process Costing, Changes in Output Measures, Multiple Departments

Grayson Company produces an industrial chemical used for cleaning and lubricating machinery. In the Mixing Department, liquid and dry chemicals are blended to form slurry. Output is measured in gallons. In the Baking Department, the slurry is subjected to high heat, and the residue appears in irregular lumps. Output is measured in pounds. In the Grinding Department, the irregular lumps are ground into a powder, and this powder is placed in 50-pound bags. Output is measured in bags produced. In April, the company reported the following data:

1. The Mixing Department transferred 51,600 gallons to the Baking Department, costing $206,400. Each gallon of slurry weighs two pounds.
2. The Baking Department transferred 103,200 pounds (irregular lumps) to the Grinding Department. At the beginning of the month, there were 5,600 gallons of slurry in process, 35 percent complete, costing $31,900 (transferred-in cost of $22,400 plus conversion cost of $9,500). No additional direct materials are added in the Baking Department. At the end of April, there was no ending work in process. Conversion costs for the month totaled $220,248. Normal loss during baking is 5 percent of good output. All transferred-in materials are lost, but since loss occurs uniformly throughout the process, only 50 percent of the conversion units are assumed to be lost.
3. The Grinding Department transferred 2,580 bags of chemicals to its finished goods warehouse. Beginning work in process for this department was 24,500 pounds, 45 percent complete with the following costs: transferred-in cost, $132,000; conversion cost, $16,000. Bags are used at the end of the process and cost $1.40 each. During bagging, normally one out of every 11 bags is torn and must be discarded. No powder is lost (the tearing occurs when the bag is being attached to a funnel). Conversion costs for the month's production are $170,382. There is no ending work in process.

Required:

1. Using FIFO, calculate the cost per bag of chemicals transferred to the finished goods warehouse. Round per-unit costs to the nearest cent. Round other solutions to the nearest unit or dollar as needed.

Baking Department (to obtain the cost of goods transferred out):

Units to account for:
Beginning work in process	fill in the blank 3687a4fb5f8002f_1
Units started	fill in the blank 3687a4fb5f8002f_2
Total units to account for	fill in the blank 3687a4fb5f8002f_3
Units accounted for:
Units transferred out	fill in the blank 3687a4fb5f8002f_4
Normal spoilage	fill in the blank 3687a4fb5f8002f_5
Abnormal spoilage	fill in the blank 3687a4fb5f8002f_6
Total units accounted for	fill in the blank 3687a4fb5f8002f_7

	Equivalent Units
	Conversion Costs	Transferred In
Total equivalent units	fill in the blank 3687a4fb5f8002f_8	fill in the blank 3687a4fb5f8002f_9
Total unit cost	$fill in the blank 3687a4fb5f8002f_10

Cost of units transferred out:
Started and competed		$fill in the blank 3687a4fb5f8002f_11
Prior period costs	$fill in the blank 3687a4fb5f8002f_12
Costs to finish	fill in the blank 3687a4fb5f8002f_13	fill in the blank 3687a4fb5f8002f_14
Normal spoilage		fill in the blank 3687a4fb5f8002f_15
Total		$fill in the blank 3687a4fb5f8002f_16

Grinding Department:

Total units accounted for

fill in the blank 3687a4fb5f8002f_17

Note: (For direct materials: 11 bags are used to get 10 good bags).

Unit cost of units started and completed:
	Direct Materials	Conversion Costs	Transferred In	Total
Costs added	$fill in the blank 3687a4fb5f8002f_18	$fill in the blank 3687a4fb5f8002f_19	$fill in the blank 3687a4fb5f8002f_20
Total equivalent units	fill in the blank 3687a4fb5f8002f_21	fill in the blank 3687a4fb5f8002f_22	fill in the blank 3687a4fb5f8002f_23
Cost per equivalent unit	$fill in the blank 3687a4fb5f8002f_24	$fill in the blank 3687a4fb5f8002f_25	$fill in the blank 3687a4fb5f8002f_26	$fill in the blank 3687a4fb5f8002f_27

Unit cost of units from beginning work in process:
Prior period costs	$fill in the blank 3687a4fb5f8002f_28
Costs to finish:
Direct materials	fill in the blank 3687a4fb5f8002f_29
Conversion costs	fill in the blank 3687a4fb5f8002f_30
Total	$fill in the blank 3687a4fb5f8002f_31
Unit cost	$fill in the blank 3687a4fb5f8002f_32	per unit

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