QUESTION 2 (33 marks) (Module 5)


Mist Fertilizer Ltd manufactures pre-mixed garden fertilizer for the garden centre retail market. The original ingredients including nitrogen, phosphorous and potassium components are mixed in the Primary Process Department (PPD). The fertilizer mix is then transferred to the Granulating and Blending Department (G&BD) for blending and drying (and where a final ingredient is added 70% through the process) and then the mix is transferred to the Bagging Department (BD) where the product is finished and bagged ready for sale. Conversion costs (labour and overheads) are assumed to be incurred evenly throughout the process.


In the Granulating and Blending Department (G&BD) at the commencement of June 2018, there were 10,800 kgs of mixture in progress, 50% complete, costing at 1 June 2018 $40,550 from the prior PPD, as well as $10,400 for conversion costs incurred in the G&BD so far. During the month of June, a further 80,000 kg of fertilizer mix came into the G&BD from the PPD, with costs attached from that prior department amounting to $109,270.


The cost of mixture ingredients in the G&BD for June amounted to $108,960 while conversion costs incurred were $250,525. At the end of June there were 15,300 kgs of mixture on hand at the 75% point in the process, the rest having been transferred to the Bagging Department (BD).



Using the excel templates provided, determine the cost of the completed Granulating and Blending Department mixture for June, the cost of the incomplete mixture at the end of June, complete the Granulating and Blending Department Work In Process (WIP) Inventory Ledger Account for June, and prepare the general journal entry for materials transferred out of Granulating and Blending Department WIP during June using:


  1. the Weighted Average costing assumption (15 marks).
  2. the FIFO assumption (16 marks).
  3. Ensure that you employ the correct use of the excel spreadsheet – formula in all cells apart from the data section (2 marks)


QUESTION 3 (37 marks) (Modules 7-8)


Woody Paints (WP) produces two paint types – the Silky and the Smooth. Projected sales (in units) for the 2 products in litres for 2019 – 2021:


  2019 2020 2021 2022
Silky 120,000 130,000 135,000 135,000
Smooth 70,000 80,000 85,000 85,000


Current sales prices in 2018 Silky $8 per litre & Smooth $10 per litre (expected to increase by 2% in 2019 and then remain stable for 3 years)

Inventories are planned for each product so that projected ending finished goods inventory is 10% of the following year’s projected sales in units.

The per unit raw material requirements for one litre of the products are as follows:


    Silky Smooth Cost per litre/kg
Base paint litres 0.8 0.7 $0.50
Additives kilograms 0.1 0.2 $2.00
Container (1 per unit)     $0.20


The desired materials ending inventory is 50% of that required for the next year’s production.

Opening materials inventories:

Base paint litres 72,500
Additives kilograms 9,500
Containers units 65,000


Direct Labour required per unit/litre (at $15 per hour – no increase expected)

Labour hours

Silky        Smooth

0.1                  0.2


Opening finished goods inventories (in units):

Silky         60,000

Smooth   35,000


The desired ending finished goods inventory is equal to the 10% of following year’s sales in units.



For the two years 2019 and 2020:

(note: use the excel templates provided)


  1. Prepare a sales budget in units and dollars (5 marks)
  2. Prepare a production budget in units for the Silky and the Smooth paint products. (9 marks)
  3. Prepare direct materials usage budgets in units for each of the materials (separate budgets) and calculate the dollar purchases for each, showing the 2 years, for the Silky and the Smooth paint products. Note that as both products use the same materials, these materials budgets should be for the combined usage of the Silky and the Smooth paint e.g. total Base paint needed for both each year. (16 marks)
  4. Calculate the total value of materials purchases each year. (1 mark)
  5. Prepare a direct labour budget. (2 marks)
  6. Actual production of Silky paints in 2019 turned out to be 75,000 units (litres), using 9,375 kg of additives at a cost of $16,875. Calculate the materials price and volume variance for the additives for Silky paints in 2019. (4 Marks)

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