Juicy Ltd produces a mixed-berry-flavoured fruit drink, in 250 ml bottles. Production takes place in departments: first Mixing, then Bottling and finally Packaging. The manufacturing costs for each department for March were:
In March the output of the Mixing Department was 7500 litres, the output of the Bottling Department was 30 000 bottles, and the output of the Packaging Department was 30 000 packed bottles. There are no work in process inventories.
1. What is the cost per litre of fruit drink produced by the Mixing Department for March?
2. What is the cost per filled bottle produced by the Bottling Department for March (including the cost of the solution produced in the Mixing Department)?
3. What is the cost per packed bottle produced by the Packaging Department for March (including the cost of the filled bottles produced in the Bottling Department)?
4. What information do you obtain from estimating the cost per bottle, using Steps 1 to 3 above, that is not available from the method described in the chapter?
5. Prepare the journal entries to record the production costs for March. Assume that the costs of the three production departments are charged to separate work in process inventory accounts.
6. Do you recommend that the company use a single work in process inventory account or separate work in process inventory accounts for each production department? Explain your answer.