Case 1. Hiebert Chocolate, Ltd., is located in Memphis. The company prepares gift boxes of
chocolates for private parties and corporate promotions. Each order contains a pre-determined
selection of chocolates that are distributed and sold by various retail stores. The chocolate gift
boxes are made in a three stage production process: Mixing, Drying, and Packaging. In the
Mixing Department, chocolate is melted and mixed with other ingredients. The Drying
Department takes the melted mixture, forms it into various shapes, and dries the chocolates.
The Packaging Department takes the dried chocolates and boxes them, just before they are sent
to finished goods. Accordingly, Hiebert uses a process costing system.
One of Hiebert's largest customers is Wal-Mart. This organization purchases roughly 80%
of all Hiebert's products.
The following data for the Packaging Department for March are available:
Started in production
Beginning WIP-% complete
Ending WIP-% complete
Beginning WIP-Transferred-in costs
Beginning WIP-Materials costs
Beginning WIP-Conversion costs
Total conversion costs
Ben Hiebert, president of Hiebert Chocolate, Ltd, is trying to determine whether to use
weighted-average or FIFO product costing system, since Hiebert's contract with Wal-Mart
allows for a sales price of cost per department + 15%.
Consider only the Packaging Department data. Prepare cost of production reports using
both weighted-average and FIFO process costing.
2. Which method should Heibert use and why?
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