Stretch Enterprises is aptly named because of its signature item---chewing gum! The owners started the business years ago when no existing gum had the right flavor and texture combination. After years of perfecting the process, they had a finely tuned operation. this year, Stretch's main processing department reported the following activity and costs. DM Conversion Costs Units in beg. WIP Inventory 300 Beg. WIP Int. degree of completion 100% 30% Cost in beg. WIP Inventory $ 298 $ 456 New Units started 22,000 Costs added to WIP Invt. this period $ 5,500 $ 4,362 Units completed Units in ending WIP Invt. Ending WIP Invt. degree of completion 21,300 1,000 100% 60% All DM resources are added to Stretch's processing department at the beginning of processing. Conversion costs are added evenl throughout the process. Required a. Complete Steps 1-5 of the template for Stretch Enterprises this year using the FIFO method of process costing, clearly labeling the following. • Equivalent units of production for both DM and conversion costs. • The cost per equivalent unit for both DM and conversion costs. • The total cost of units completed and the total cost of units in ending WIP Inventory. b. Record the following journal entries. 1. Transfer of DM costs from RM Inventory into the processing department this year. 2. Recognition of conversion costs incurred for the period; assume all DL costs are paid in cash, totaling $2,500. 3. The completion of units; they are now ready for sale. c. Present Stretch's WIP Inventory T-account for the period, showing all debits and credits that would have existed or would have been entered in the account this year, and determine its ending balance.
Stretch Enterprises is aptly named because of its signature item---chewing gum! The owners started the business years ago when no existing gum had the right flavor and texture combination. After years of perfecting the process, they had a finely tuned operation. this year, Stretch's main processing department reported the following activity and costs. DM Conversion Costs Units in beg. WIP Inventory 300 Beg. WIP Int. degree of completion 100% 30% Cost in beg. WIP Inventory $ 298 $ 456 New Units started 22,000 Costs added to WIP Invt. this period $ 5,500 $ 4,362 Units completed Units in ending WIP Invt. Ending WIP Invt. degree of completion 21,300 1,000 100% 60% All DM resources are added to Stretch's processing department at the beginning of processing. Conversion costs are added evenl throughout the process. Required a. Complete Steps 1-5 of the template for Stretch Enterprises this year using the FIFO method of process costing, clearly labeling the following. • Equivalent units of production for both DM and conversion costs. • The cost per equivalent unit for both DM and conversion costs. • The total cost of units completed and the total cost of units in ending WIP Inventory. b. Record the following journal entries. 1. Transfer of DM costs from RM Inventory into the processing department this year. 2. Recognition of conversion costs incurred for the period; assume all DL costs are paid in cash, totaling $2,500. 3. The completion of units; they are now ready for sale. c. Present Stretch's WIP Inventory T-account for the period, showing all debits and credits that would have existed or would have been entered in the account this year, and determine its ending balance.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Stretch Enterprises is aptly named because of its signature item—chewing gum! The owners started the business years ago when no existing gum had the right flavor and texture combination. After years of perfecting the process, they had a finely tuned operation. This year, Stretch's main processing department reported the following activity and costs:
### Table Summary
| | DM | Conversion Costs |
|------------------------|-------------|------------------|
| **Units in beg. WIP Inventory** | 300 | |
| **Beg. WIP Int. degree of completion** | 100% | 30% |
| **Cost in beg. WIP Inventory** | $298 | $456 |
| **New Units started** | 22,000 | |
| **Costs added to WIP Invt. this period** | $5,500 | $4,362 |
| **Units completed** | 21,300 | |
| **Units in ending WIP Invt.** | 1,000 | |
| **Ending WIP Invt. degree of completion** | 100% | 60% |
- All DM (Direct Materials) resources are added to Stretch's processing department at the beginning of processing.
- Conversion costs are added evenly throughout the process.
### Required Tasks
a. Complete Steps 1-5 of the template for Stretch Enterprises this year using the FIFO method of process costing, clearly labeling the following:
- Equivalent units of production for both DM and conversion costs.
- The cost per equivalent unit for both DM and conversion costs.
- The total cost of units completed and the total cost of units in ending WIP Inventory.
b. Record the following journal entries:
1. Transfer of DM costs from RM Inventory to the processing department this year.
2. Recognition of conversion costs incurred for the period; assume all DL costs are paid in cash, totaling $2,500.
3. The completion of units; they are now ready for sale.
c. Present Stretch’s WIP Inventory T-account for the period, showing all debits and credits that would have occurred and show what would have been entered in it the whole year, and determine its ending balance.
d. If Stretch was able to sell all of its units completed this year for $14,400, how much gross margin did the
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