Question

Question: Spring Fresh produces premium bottled water. Spring Fresh purchases artesian water, stores the water in large tanks, and then runs the water through two processes: filtration and bottling.

During February, the filtration process incurred the following costs in processing

200,000 liters:

Wages of workers operating filtration equipment	$34,950
Manufacturing overhead allocated to filtration	19,050
Water	110,000

Spring Fresh had no beginning Work-in-Process Inventory in the Filtration Department in February.

Requirements

1. Use the FIFO method to compute the February conversion costs in the Filtration Department.

2. The Filtration Department completely processed 200,000 liters in February. Use

the FIFO method to determine the filtration cost per liter.

Short answer

Answer:

1. The February conversion cost in the filtration department is $54,000

2. The filtration cost per liter in February is $0.27 per liter.

Step-by-step solution

Conversion cost in the filtration department

$$\begin{gathered} \mathbf{\text{Conversioncost=Directlabourcost+manufacturingoverhead}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{34}\mathbf{,}\mathbf{950}\mathbf{+}\mathbf{\$}\mathbf{19}\mathbf{,}\mathbf{050} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{54}\mathbf{,}\mathbf{000} \end{gathered}$$

Filtration cost per liter

$$\begin{gathered} \mathbf{Filtration}\mathbf{}\mathbf{cost}\mathbf{}\mathbf{per}\mathbf{}\mathbf{liter}\mathbf{}\mathbf{=}\frac{\mathbf{Conversion}\mathbf{}\mathbf{cost}}{\mathbf{Equalent}\mathbf{}\mathbf{completed}\mathbf{}\mathbf{units}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\frac{\mathbf{\$}\mathbf{54}\mathbf{,}\mathbf{000}}{\mathbf{200}\mathbf{.}\mathbf{000}} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{0}\mathbf{.}\mathbf{27} \end{gathered}$$