Ring Company Produces Two Types of Product: Small and Large

question 66

Multiple Choice

Ring Company produces two types of product: Small and Large. Two work orders for two batches of the products are shown below, along with some additional cost information:
$\begin{array}{lcc}&\text { Small }&\text { Large } \\&\text {Work Order } 10&\text { Work Order } 11\\\hline\text { Direct materials (actual costs) } & \$ 45,000 & \$ 75,000 \\\text { Applied conversion costs: } & & \\\text { Mixing } &?& ? \\\text { Cooking } & \$ 12,000 & \$ 12,000 \\\text { Bottling } & \$ 10,000 & \$ 15,000 \\\\\text { Batch size (bottles) }& 5,000 & 5,000\end{array}$
In the Mixing Department,conversion costs are applied on the basis of direct labour hours.Budgeted conversion costs for the department for the year were $50,000 for labour and $125,000 for overhead.Budgeted direct labour hours were 2,500.It takes three minutes to mix the ingredients needed for each bottle.
Small (Work Order 10) and Large (Work Order 11) flow through the Mixing Department first,then through the Cooking and Bottling departments.
-Refer to the figure.What is Ring Company's journal entry to record materials used in the Mixing Department for Work Order 10?

• A)\(\begin{array}{llr}
• \text {Materials } &45,000\\
• \quad\quad\quad\quad \text { Work in Process-Mixing } &&45,000\\
• \end{array}\)
• B)Work in Process-Mixing \(\quad 17,500\)
• Conversion Costs Control\(\quad\quad\quad\quad 17,500\)
• C)Conversion Costs Control\(\quad\)17,500
• Work in Process-Mixing\(\quad\)\(\quad\)\(\quad\)\(\quad\)17,500
• D)\(\begin{array}{c}
• \text { Work in Process-Mixing }&45,000 \\
• \text { Materials }&&45,000
• \end{array}\)

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Definitions:

Economic Life

Refers to the duration over which an asset remains productive or useful for its intended purpose.

Capital Lease

A lease agreement that is considered a purchase of an asset for accounting purposes, because it transfers substantially all the risks and rewards of ownership.

Bargain Purchase Price

A price for an asset that is significantly below its fair market value.

CRA

Credit Risk Analysis, assessing the risk of default on a loan by evaluating the potential borrower's creditworthiness, or it could stand for Canada Revenue Agency, the federal agency responsible for tax laws for the Canadian government.