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Process Costing – Paddy's Brewery ( 25 points)

 

            Despite their limited success with Paddy's Pub, the owners Dennis, Mac, and Charlie, have decided to make and distribute their own secret microbrew. They believe their “enriched beer” will be a great success and put their archrival Mr. Kim's out of business. Now that the brewery is up and operational, they need to understand the costs involved in making the beer. Given Frank's extensive business knowledge, Paddy's hires him to implement an appropriate costing system. Given that the microbrew is produced in large homogeneous batches, Frank implements a weighted-average process costing system. The brewery has 2 distinct processes or departments: brewing and packaging.      

           

            In the brewing department, direct materials are added at the beginning of the brewing process and conversion costs are incurred evenly throughout. Once the microbrew is finished, it is transferred to the packaging department. In this department, direct material (bottles...etc) are added at the beginning of the process and conversion costs (placing the bottles into the boxes) are incurred evenly throughout the process.

 

 

1. In January, Paddy's produces their first batch of the microbrew and, therefore, does not have any beginning balances. They started 10,000 gallons and completed 8,000. The gallons not completed were 50 % complete with respect to conversion costs. The costs associated with this batch were $20,000 in direct materials and $10,000 in conversion costs. Calculate the cost of the gallons completed and transferred out and the valuation of the ending work-in-process account for the brewing department for January (be sure to show and round all calculations to two decimals).

 

 

 

2. In February, Paddy's starts another batch of 10,000 gallons in the brewing department. During the month, they complete and transfer out 8,000 gallons. The remaining gallons are 60% complete with respect to conversion costs. The costs added in February were $15,000 in direct materials and $10,000 in conversion costs. Calculate the cost associated with the gallons completed and transferred out and the valuation of the ending work-in-process account in the brewing department for February (be sure to show and round all calculations to two decimals).  

 

 

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