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Golden Ring Company produces two types of product: Large and Larger. Two work orders for two...

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Accounting

Golden Ring Company produces two types of product: Large andLarger. Two work orders for two batches of the products are shownbelow, along with some additional cost information:

LargeLarger
Work Order 10Work Order 11
Direct materials (actualcosts)$45,000$75,000
Applied conversioncosts:
Mixing??
Cooking$12,000$12,000
Bottling$10,000$15,000
Batch size(bottles)5,0005,000


In the Mixing Department, conversion costs are applied on the basisof direct labor hours. Budgeted conversion costs for the departmentfor the year were $50,000 for labor and $125,000 for overhead.Budgeted direct labor hours were 2,500. It takes three minutes tomix the ingredients needed for each bottle.

Large (Work Order 10) and Larger (Work Order 11) flow through theMixing Department first, then through the Cooking and Bottlingdepartments.

What is Golden Ring Company's journal entry to apply conversioncosts in the Mixing Department for Work Order 10?

a.

Work in Process-Mixing45,000

Materials45,000

b.

Work in Process-Mixing17,500

Conversion Costs Control17,500

c.

Conversion Costs Control17,500

Work in Process-Mixing17,500

d.

Materials45,000

Work in Process-Mixing45,000

Answer & Explanation Solved by verified expert
4.3 Ratings (810 Votes)

  • When Conversion cost is applied to Work in Process, the Work in Process account is DEBITED and Conversion cost account is CREDITED.
  • Working

A = 50000 + 125000

Budgeted Conversion Cost

$175,000

B

Budgeted Direct Labor hours

                         2,500

C = A/B

Conversion cost rate

$70

D

Work Order 10 no. of bottles

                         5,000

E = 3 min / 60

Hours per bottle

                            0.05

F = D x E

Total hours used for Work Order

                             250

G = F x C

Conversion Cost to be applied

$17,500

  • Correct Answer = Option ‘B’

Work in Process-Mixing17,500 [Debit]

Conversion Costs Control17,500 [Credit]
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