Since we were told that the Company received the amount of $18,000 on April 1, 2020 for a one year's rent paid in advance in which the transaction has a credit to a nominal account, this means we have to record the transaction by Debiting Rent revenue with 4,500 and Crediting Unearned rent revenue, with the same amount of $4,500 calculated as
Value-added packaging is self-explanatory, you try to make a packaging that adds more value to the customer. Since every customer will see the package, you can reach them more than traditional media planning. The value itself can vary widely. By making an artistic design, the customer can better impression about the product. A premium looked packaging will show more prestige to the customer. Some creative packaging can efficiently save space while still protecting the product.
Equivalent units are notional whole units which represent incomplete work and are used to apportion cost between work progress and completed work
Equivalent units = Degree of work done(%) × units of inventory
Conversion cost
<em>Item</em> <em> equivalent units</em>
Opening inventory 40% × 5,000 = 2,000
Fully worked units 100% × 30,000= 30,000
Closing inventory 40%× 10,000= <u> 4,000 </u>
Total equivalent unit <u> 36,000</u>
Notes
The following notes explains the computation of the items of equivalent unit for conversion cost:
1. DOC for opening inventory is 40% i.e 100%-60%. Remember that 60% work has been done in the previous period, so the balance is to be done in this current period
2. Fully work represent the units of inventory introduced in the current period and completed in the same period. Meaning 100% work was achieved in the period.
3. Closing work is only 40% completed. This represent work started this period but not yet completed.
Material cost
<em>Item </em> <em> equivalent units</em>
Opening inventory 0% × 5,000 = 0
Fully worked units 100% × 30,000= 30,000
Closing inventory 100%× 10,000= <u> 10,000 </u>
Total equivalent unit <u> 40,000</u>
Notes
The following notes explains the computation of the items of equivalent unit for Material cost:
1. DOC for opening inventory is 0% i.e 100%-1000%. Remember that materials are added at the beginning. Hence all the materials required for the opening inventory had been added in the previous period
2. Fully work represent the units of inventory introduced in the current period and completed in the same period. Meaning 100% materials was added in the period.
3. All the materials required for the closing inventory were added in this period, hence, 100% degree of completion was used
The answer is D) None of these statement is relevant in the decision to further process the cream into butter.
Explanation:
option A) the amount paid to the farmers to purchase the unprocessed milk: this information is not relevant to further develop the cream and low fat milk to butter. It was already considered before this stage of production.
Option B) the cost of breaking down the unprocessed milk into cream and low-fat milk: this cost was already accounted for since the processing into cream and low fat milk is completed.
Option C) the portion of corporate fixed expenses that are currently being allocated to cream: This information is not going to help in the decision making for further processing.
