Determine the equivalent units for June for the Blending Department

Sunspot Beverages, Ltd., of Fiji makes blended tropical fruit drinks in two stages. Fruit juices are extracted from fresh fruits and then blended in the Blending Department. The blended juices are then bottled and packed for shipping in the Bottling Department. The following information pertains to the operations of the Blending Department for June.

Percent Completed

Units Materials Conversion

Work in process, beginning 110,000 70% 40%

Started into production 520,000

Completed and transferred out 510,000

Work in process, ending 120,000 75% 25%

Materials Conversion

Work in process, beginning $ 48,100 $ 17,900

Cost added during June $ 515,900 $ 381,700

Required:

Assume that the company uses the weighted-average method.

1. Determine the equivalent units for June for the Blending Department.

2.

Compute the costs per equivalent unit for the Blending Department. (Round your answers to 2 decimal places.)

3 Determine the total cost of ending work in process inventory and the total cost of units transferred to the Bottling Department. (Round your intermediate calculations to 2 decimal places.

Cost of ending work in process inventory

Cost of units completed and transferred out

4 Prepare a cost reconciliation report for the Blending Department for June. (Round your intermediate calculations to 2 decimal places. Round your final answers to the nearest whole dollar.)

Cost to be accounted for

Total cost to be accounted for

Cost accounted for as follows

Total cost accounted for

Mercer Asbestos Removal Company removes potentially toxic asbestos insulation and related products from buildings. There has been a long-simmering dispute between the company’s estimator and the work supervisors. The on-site supervisors claim that the estimators do not adequately distinguish between routine work such as removal of asbestos insulation around heating pipes in older homes and nonroutine work such as removing asbestos-contaminated ceiling plaster in industrial buildings. The on-site supervisors believe that nonroutine work is far more expensive than routine work and should bear higher customer charges. The estimator sums up his position in this way: “My job is to measure the area to be cleared of asbestos. As directed by top management, I simply multiply the square footage by $2.80 to determine the bid price. Since our average cost is only $2.58 per square foot, that leaves enough cushion to take care of the additional costs of nonroutine work that shows up. Besides, it is difficult to know what is routine or not routine until you actually start tearing things apart.”

To shed light on this controversy, the company initiated an activity-based costing study of all of its costs. Data from the activity-based costing system follow:

Activity Cost Pool Activity Measure Total Activity

Removing asbestos Thousands of square feet 800 thousand square feet

Estimating and job setup Number of jobs 400 jobs

Working on nonroutine jobs Number of nonroutinejobs 100 nonroutine jobs

Other (costs of idle capacity and

organization-sustaining costs) None

Note: The 100 nonroutine jobs are included in the total of 400 jobs. Both nonroutine jobs and routine jobs require estimating and setup.

Costs for the Year

Wages and salaries $ 372,000

Disposal fees 775,000

Equipment depreciation 96,000

On-site supplies 58,000

Office expenses 280,000

Licensing and insurance 480,000

Total cost $ 2,061,000

Distribution of Resource Consumption Across Activities

Removing Asbestos Estimating and Job Setup Working on Nonroutine Jobs Other Total

Wages and salaries 60 % 10 % 20 % 10 % 100 %

Disposal fees 60 % 0 % 40 % 0 % 100 %

Equipment depreciation 50 % 10 % 15 % 25 % 100 %

On-site supplies 70 % 20 % 10 % 0 % 100 %

Office expenses 10 % 40 % 20 % 30 % 100 %

Licensing and insurance 25 % 0 % 60 % 15 % 100 %

Required:

1.

Perform the first-stage allocation of costs to the activity cost pools.

Removing Asbestos	Estimating and Job Setting	Working on/Nonroutine on Jobs	Other	total
Wages
Disposal fees
Equipment Dep
Onsite Supplies
Other expenses
Licensing and insurance
Total Cost

2. Compute the activity rates for the activity cost pools

Activity Cost pool	Activity
Removing asbestos		Per thousand sqft
Estimating & job setting		Per job
Working on nonroutine jobs		Per no routine job

Using the activity rates you have computed, determine the total cost and the average cost per thousand square feet of each of the following jobs according to the activity-based costing system. (Round the "Average cost" to 2 decimal places.)

a. A routine 1,000-square-foot asbestos removal job.

b. A routine 2,000-square-foot asbestos removal job.

c. A nonroutine 2,000-square-foot asbestos removal job