Initial Work in Process Inventory of Supreme Diners Inc

FIFO Method of Accounting for Initial Work in Process Inventory. Supreme Diners Inc. produces a chemical agent for commercial use. The company accounts for production in two cost centers: (1) Cooking and (2) Mix-Pack. In the first cost center liquid substances are combined in large cookers and boiled, which causes a normal decrease in volume from evaporation. After cooking, the chemical is transferred to Mix-Pack, the second cost center. It then has an equal quantity of alcohol added before being mixed and bottled in one-liter containers.

Materials are added at the beginning of production in each cost center, and labor is added equally during production in each cost center. The process is "in control" as lone as the yield ratio for the Cooking Department is not less than 78%.

The fifo method is used to cost work in process inventories, and transfers are at an average unit cost; i.e., the total cost transferred divided by the total number of units transferred.

The following information is available for the month of October:
                                             Cooking         Mix-Pack
Cost Information                  Department     Department
Work in process, October:
Materials                                $ 990               $ 120
Labor                                       100                    60
Overhead                                   80                    48
Prior department cost 426
Month of October:
Materials                              39,600              15,276
Labor                                   10,050             16,000
Overhead                                8,040             12,800

Inventory and production records show that the Cooking Department had 1,000 liters 40% processed on October 1 and 800 liters 50% processed on October 31; the Mix-Pack Department had 600 liters 50% processed on October 1 and 1,000 liters 30% processed on October 31.

Production reports for October show that the Cooking Department started 50,000 liters into production and completed and transferred 40,200 liters to Mix- Pack, and Mix-Pack completed and transferred 80,000 one-liter containers of the finished product to the distribution warehouse.

Required: (1) A quantity report for the Cooking and the Mix-Pack cost centers which accounts for both actual units and equivalent unit production.
(2) A cost of production report for each of the two cost centers which computes total cost and cost per unit for each element of cost in inventories and October production. Compute the total cost and cost per unit for transfers.
(3) The yield ratio for Cooking, indicating whether or not the process was "in control" during October.