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Process Costing - Spirit Cola Corp.

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Spirit Cola Corp. produces a new soft drink brand. Sweet spring , using two production departments, mixing and bottling. Spirits beginning balances and data pertinent to the mixing departments activities for 2020 follow:

Accounts Beginning Balance
Cash $45,000
Raw materials inventory 14,800
Production Supplies 100
Work in Process invent (400,000) units 48,000
Common stock 107,900

1. Sprint Cola issued additional common stock for $54,000 cash.

2. The company purchased raw materials and production supplies for $29,600 and $800, respectively, in cash.

3. The company issued $32,360 of raw materials to the mixing department for the production of $800,000 units of sweet spring that were started in 2010. A unit of soft drink is the amount needed to fill a bottle.

4. The mixing department used 2,400 hours of labor during 2010, consisting of 2,200 hours for direct labor and 200 hours for indirect labor. The average was $9.60 per hour. All wages were paid in 2010 in cash.

5. The predetermined overhead rate was $1.60 per direct labor hour.

6. Actual overhead cost other than indirect materials and indirect labor for the year amounted to $1,260 which was paid in cash.

7. The mixing department completed 600,000 units of sweet spring. The remaining inventory was 25% complete.

8. The completed soft drink was transferred to the bottling department.

9. The ending balance in the production supplies account was $560.

A. Determine the number of equivalent units of production.

B. Determine the product cost per equivalent unit.

C. Allocate the total cost between the ending work in process inventory and units transferred to the bottling department.

D. Record the transactions in T-Accounts


Solution Summary

The solution explains how to determine the equivalent units, costs assigned to units and recording of transactions in T accounts.