Please do not give solution in image format thanku Required:a. What is the unit cost of each model transferred to finished goods in February?b. What is the balance of the Work-in-Process Inventory on February 28 for Fabrication? For Detailing?Complete this question by entering your answers in the tabs below.Required AWhat is the unit cost of each model transferred to finished goods in February?ProductDI-1400DI-3800DI-5000DI-8000Required BRequired AUnit CostRequired:a. What is the unit cost of each model transferred to finished goods in February?b. What is the balance of the Work-in-Process Inventory on February 28 for Fabrication? For Detailing?FabricationDetailing< Required AComplete this question by entering your answers in the tabs below.Required BRequired B >What is the balance of the Work-in-Process Inventory on February 28 for Fabrication? For Detailing?Work-in-ProcessInventory< Required ARequired B > Drew Implements makes four models of utility and light construction tractors. The model names are DI-1400, DI-3800, DI-5000, and DI-8000. Drew manufactures the tractors in two departments-Fabrication and Detailing. All four models are processed initially inFabrication, where all material is assembled into the basic tractor. The DI-1400 model is then transferred to finished goods. Afterprocessing in Fabrication, the other three models are transferred to Detailing for additional work (though no new materials are added)and then transferred to finished goods.There were no beginning work-in-process inventories on February 1. Data for February are shown in the following table. Ending workin process is 90 percent complete in Fabrication and 40 percent complete in Detailing. Conversion costs are allocated based on thenumber of equivalent units processed in each department.Units startedUnits completed in FabricationUnits completed in DetailingMaterialsConversion costs:FabricationDetailingTotal conversion costsTotal$ 4,159,400$ 1,578,5001,049,725$ 2,628,225DI-1400740690$ 444,000DI-3800595570545DI-5000390365340$ 1,142,400 $ 1,326,000Required:a. What is the unit cost of each model transferred to finished goods in February?b. What is the balance of the Work-in-Process Inventory on February 28 for Fabrication? For Detailing?DI-8000215165140$ 1,247,000

Work in process (WIP) inventory refers to materials that are waiting to be assembled and sold. WIP…

Required: a. What is the unit cost of each model transferred to finished goods in February? b. What is the balance of the Work-in-Process Inventory on February 28 for Fabrication? For Detailing? Complete this question by entering your answers in the tabs below. Required A What is the unit cost of each model transferred to finished goods in February? Unit Cost Product Required B DI-1400 DI-3800 DI-5000 DI-8000 < Required A Required B >

Required: a. What is the unit cost of each model transferred to finished goods in February? b. What is the balance of the Work-in-Process Inventory on February 28 for Fabrication? For Detailing? Complete this question by entering your answers in the tabs below. Required A What is the unit cost of each model transferred to finished goods in February? Unit Cost Product Required B DI-1400 DI-3800 DI-5000 DI-8000 < Required A Required B >

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter6: Process Costing

Section: Chapter Questions

Problem 14E: Lacy, Inc., produces a subassembly used in the production of hydraulic cylinders. The subassemblies...

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Golding Manufacturing, a division of Farnsworth Sporting, Inc., produces two different models of bows and eight models of knives. The bow-manufacturing process involves the production of two major subassemblies: the limbs and the handle. The limbs pass through four sequential processes before reaching final assembly: lay-up, molding, fabricating, and finishing. In the Lay-Up Department, limbs are created by laminating layers of wood. In Molding, the limbs are heat treated, under pressure, to form a strong resilient limb. In the Fabricating Department, any protruding glue or other processing residue is removed. Finally, in Finishing, the limbs are cleaned with acetone, dried, and sprayed with the final finishes. The handles pass through two processes before reaching final assembly: pattern and finishing. In the Pattern Department, blocks of wood are fed into a machine that is set to shape the handles. Different patterns are possible, depending on the machines setting. After coming out of the machine, the handles are cleaned and smoothed. They then pass to the Finishing Department where they are sprayed with the final finishes. In Final Assembly, the limbs and handles are assembled into different models using purchased parts such as pulley assemblies, weight adjustment bolts, side plates, and string. Golding, since its inception, has been using process costing to assign product costs. A predetermined overhead rate is used based on direct labor dollars (80 percent of direct labor dollars). Recently, Golding has hired a new controller, Karen Jenkins. After reviewing the product costing procedures, Karen requested a meeting with the divisional manager, Aaron Suhr. The following is a transcript of their conversation: KAREN: Aaron, I have some concerns about our cost accounting system. We make two different models of bows and are treating them as if they were the same product. Now I know that the only real difference between the models is the handle. The processing of the handles is the same, but the handles differ significantly in the amount and quality of wood used. Our current costing does not reflect this difference in direct material input. AARON: Your predecessor is responsible. He believed that tracking the difference in direct material cost wasnt worth the effort. He simply didnt believe that it would make much difference in the unit cost of either model. KAREN: Well, he may have been right, but I have my doubts. If there is a significant difference, it could affect our views of which model is more important to the company. The additional bookkeeping isnt very stringent. All we have to worry about is the Pattern Department. The other departments fit what I view as a process-costing pattern. AARON: Why dont you look into it? If there is a significant difference, go ahead and adjust the costing system. After the meeting, Karen decided to collect cost data on the two models: the Deluxe model and the Econo model. She decided to track the costs for one week. At the end of the week, she had collected the following data from the Pattern Department: a. There were a total of 2,500 bows completed: 1,000 Deluxe models and 1,500 Econo models. b. There was no beginning work in process; however, there were 300 units in ending work in process: 200 Deluxe and 100 Econo models. Both models were 80 percent complete with respect to conversion costs and 100 percent complete with respect to direct materials. c. The Pattern Department experienced the following costs: d. On an experimental basis, the requisition forms for direct materials were modified to identify the dollar value of the direct materials used by the Econo and Deluxe models: Required: 1. Compute the unit cost for the handles produced by the Pattern Department, assuming that process costing is totally appropriate. 2. Compute the unit cost of each handle, using the separate cost information provided on materials. 3. Compare the unit costs computed in Requirements 1 and 2. Is Karen justified in her belief that a pure process-costing relationship is not appropriate? Describe the costing system that you would recommend. 4. In the past, the marketing manager has requested more money for advertising the Econo line. Aaron has repeatedly refused to grant any increase in this products advertising budget because its per-unit profit (selling price less manufacturing cost) is so low. Given the results in Requirements 1 through 3, was Aaron justified in his position?
Healthway uses a process-costing system to compute the unit costs of the minerals that it produces. It has three departments: Mixing, Tableting, and Bottling. In Mixing, at the beginning of the process all materials are added and the ingredients for the minerals are measured, sifted, and blended together. The mix is transferred out in gallon containers. The Tableting Department takes the powdered mix and places it in capsules. One gallon of powdered mix converts to 1,600 capsules. After the capsules are filled and polished, they are transferred to Bottling where they are placed in bottles, which are then affixed with a safety seal and a lid and labeled. Each bottle receives 50 capsules. During July, the following results are available for the first two departments (direct materials are added at the beginning in both departments): Overhead in both departments is applied as a percentage of direct labor costs. In the Mixing Department, overhead is 200 percent of direct labor. In the Tableting Department, the overhead rate is 150 percent of direct labor. Required: 1. Prepare a production report for the Mixing Department using the weighted average method. Follow the five steps outlined in the chapter. Round unit cost to three decimal places. 2. Prepare a production report for the Tableting Department. Materials are added at the beginning of the process. Follow the five steps outlined in the chapter. Round unit cost to four decimal places.
Benson Pharmaceuticals uses a process-costing system to compute the unit costs of the over-the-counter cold remedies that it produces. It has three departments: mixing, encapsulating, and bottling. In mixing, the ingredients for the cold capsules are measured, sifted, and blended (with materials assumed to be uniformly added throughout the process). The mix is transferred out in gallon containers. The encapsulating department takes the powdered mix and places it in capsules (which are necessarily added at the beginning of the process). One gallon of powdered mix converts into 1,500 capsules. After the capsules are filled and polished, they are transferred to bottling, where they are placed in bottles that are then affixed with a safety seal, lid, and label. Each bottle receives 50 capsules. During March, the following results are available for the first two departments: Overhead in both departments is applied as a percentage of direct labor costs. In the mixing department, overhead is 200% of direct labor. In the encapsulating department, the overhead rate is 150% of direct labor. Required: 1. Prepare a production report for the mixing department using the weighted average method. Follow the five steps outlined in the chapter. (Note: Round to two decimal places for the unit cost.) 2. Prepare a production report for the encapsulating department using the weighted average method. Follow the five steps outlined in the chapter. (Note: Round to four decimal places for the unit cost.) 3. CONCEPTUAL CONNECTION Explain why the weighted average method is easier to use than FIFO. Explain when weighted average will give about the same results as FIFO.
Pratt Company produces two replacement parts for a popular line of Blu-ray disc players: Part A and Part B. Part A is made up of two components, one manufactured internally and one purchased from external suppliers. Part B is made up of three components, one manufactured internally and two purchased from suppliers. The company has two processes: fabrication and assembly. In fabrication, the internally produced components are made. Each component takes 20 minutes to produce. In assembly, it takes 30 minutes to assemble the components for Part A and 40 minutes to assemble the components for Part B. Pratt Company operates one shift per day. Each process employs 100 workers who each work eight hours per day. Part A earns a unit contribution margin of 20, and Part B earns a unit contribution margin of 24 (calculated as the difference between revenue and the cost of materials and energy). Pratt can sell all that it produces of either part. There are no other constraints. Pratt can add a second shift of either process. Although a second shift would work eight hours, there is no mandate that it employ the same number of workers. The labor cost per hour for fabrication is 15, and the labor cost per hour for assembly is 12. Required: 1. Identify the constraints facing Pratt, and graph them. How many binding constraints are possible? What is Pratts optimal product mix? What daily contribution margin is produced by this mix? 2. What is the drummer constraint? How much excess capacity does the other constraint have? Assume that a 1.5-day buffer inventory is needed to deal with any production interruptions. Describe the drum-buffer-rope concept using the Pratt data to illustrate the process. 3. Explain why the use of local labor efficiency measures will not work in Pratts TOC environment. 4. Suppose Pratt decides to elevate the binding constraint by adding a second shift of 50 workers (labor rates are the same as those of the first shift). Would elevation of Pratts binding constraint improve its system performance? Explain with supporting computations.
AKL Foundry manufactures metal components for different kinds of equipment used by the aerospace, commercial aircraft, medical equipment, and electronic industries. The company uses investment casting to produce the required components. Investment casting consists of creating, in wax, a replica of the final product and pouring a hard shell around it. After removing the wax, molten metal is poured into the resulting cavity. What remains after the shell is broken is the desired metal object ready to be put to its designated use. Metal components pass through eight processes: gating, shell creating, foundry work, cutoff, grinding, finishing, welding, and strengthening. Gating creates the wax mold and clusters the wax pattern around a sprue (a hole through which the molten metal will be poured through the gates into the mold in the foundry process), which is joined and supported by gates (flow channels) to form a tree of patterns. In the shell-creating process, the wax molds are alternately dipped in a ceramic slurry and a fluidized bed of progressively coarser refractory grain until a sufficiently thick shell (or mold) completely encases the wax pattern. After drying, the mold is sent to the foundry process. Here, the wax is melted out of the mold, and the shell is fired, strengthened, and brought to the proper temperature. Molten metal is then poured into the dewaxed shell. Finally, the ceramic shell is removed, and the finished product is sent to the cutoff process, where the parts are separated from the tree by the use of a band saw. The parts are then sent to the grinding process, where the gates that allowed the molten metal to flow into the ceramic cavities are ground off using large abrasive grinders. In the finishing process, rough edges caused by the grinders are removed by small handheld pneumatic tools. Parts that are flawed at this point are sent to welding for corrective treatment. The last process uses heat to treat the parts to bring them to the desired strength. In 20X1, the two partners who owned AKL Foundry decided to split up and divide the business. In dissolving their business relationship, they were faced with the problem of dividing the business assets equitably. Since the company had two plantsone in Arizona and one in New Mexicoa suggestion was made to split the business on the basis of geographic location. One partner would assume ownership of the plant in New Mexico, and the other would assume ownership of the plant in Arizona. However, this arrangement had one major complication: the amount of WIP inventory located in the Arizona plant. The Arizona facilities had been in operation for more than a decade and were full of WIP. The New Mexico facility had been operational for only 2 years and had much smaller WIP inventories. The partner located in New Mexico argued that to disregard the unequal value of the WIP inventories would be grossly unfair. Unfortunately, during the entire business history of AKL Foundry, WIP inventories had never been assigned any value. In computing the cost of goods sold each year, the company had followed the policy of adding depreciation to the out-of-pocket costs of direct labor, direct materials, and overhead. Accruals for the company are nearly nonexistent, and there are hardly ever any ending inventories of materials. During 20X1, the Arizona plant had sales of 2,028,670. The cost of goods sold is itemized as follows: Upon request, the owners of AKL provided the following supplementary information (percentages are cumulative): Gating had 10,000 units in BWIP, 60% complete. Assume that all materials are added at the beginning of each process. During the year, 50,000 units were completed and transferred out. The ending inventory had 11,000 unfinished units, 60% complete. Required: 1. The partners of AKL want a reasonable estimate of the cost of WIP inventories. Using the gating departments inventory as an example, prepare an estimate of the cost of the EWIP. What assumptions did you make? Did you use the FIFO or weighted average method? Why? (Note: Round unit cost to two decimal places.) 2. Assume that the shell-creating process has 8,000 units in BWIP, 20% complete. During the year, 50,000 units were completed and transferred out. (Note: All 50,000 units were sold; no other units were sold.) The EWIP inventory had 8,000 units, 30% complete. Compute the value of the shell-creating departments EWIP. What additional assumptions had to be made?
Hales Company produces a product that requires two processes. In the first process, a subassembly is produced (subassembly A). In the second process, this subassembly and a subassembly purchased from outside the company (subassembly B) are assembled to produce the final product. For simplicity, assume that the assembly of one final unit takes the same time as the production of subassembly A. Subassembly A is placed in a container and sent to an area called the subassembly stores (SB stores) area. A production Kanban is attached to this container. A second container, also with one subassembly, is located near the assembly line (called the withdrawal store). This container has attached to it a withdrawal Kanban. Required: 1. Explain how withdrawal and production Kanban cards are used to control the work flow between the two processes. How does this approach minimize inventories? 2. Explain how vendor Kanban cards can be used to control the flow of the purchased subassembly. What implications does this have for supplier relationships? What role, if any, do continuous replenishment and EDI play in this process?
Reducir, Inc., produces two different types of hydraulic cylinders. Reducir produces a major subassembly for the cylinders in the Cutting and Welding Department. Other parts and the subassembly are then assembled in the Assembly Department. The activities, expected costs, and drivers associated with these two manufacturing processes are given below. Note: In the assembly process, the materials-handling activity is a function of product characteristics rather than batch activity. Other overhead activities, their costs, and drivers are listed below. Other production information concerning the two hydraulic cylinders is also provided: Required: 1. Using a plantwide rate based on machine hours, calculate the total overhead cost assigned to each product and the unit overhead cost. 2. Using activity rates, calculate the total overhead cost assigned to each product and the unit overhead cost. Comment on the accuracy of the plantwide rate. 3. Calculate the global consumption ratios. 4. Calculate the consumption ratios for welding and materials handling (Assembly) and show that two drivers, welding hours and number of parts, can be used to achieve the same ABC product costs calculated in Requirement 2. Explain the value of this simplification. 5. Calculate the consumption ratios for inspection and engineering, and show that the drivers for these two activities also duplicate the ABC product costs calculated in Requirement 2.
Grundvig Manufacturing produces several types of bolts used in aircraft. The bolts are produced in batches and grouped into three product families. Because the product families are used in different kinds of aircraft, customers also can be grouped into three categories, corresponding to the product family that they purchase. The number of units sold to each customer class is the same. The selling prices for the three product families range from 0.50 to 0.80 per unit. Historically, the costs of order entry, processing, and handling were expensed and not traced to individual customer groups. These costs are not trivial and totaled 9,000,000 for the most recent year. Recently, the company started emphasizing a cost reduction strategy with an emphasis on creating a competitive advantage. Upon investigation, management discovered that order-filling costs were driven by the number of customer orders processed with the following cost behavior: Step-fixed cost component: 50,000 per step (2,000 orders define a step) Variable cost component: 20 per order Grundvig currently has sufficient steps to process 200,000 orders. The expected customer orders for the year total 200,000. The expected usage of the order-filling activity and the average size of an order by customer category follow: As a result of cost behavior analysis, the marketing manager recommended the imposition of a charge per customer order. The charge was implemented by adding the cost per order to the price of each order (computed by using the projected ordering costs and expected orders). This ordering cost was then reduced as the size of the order increased and was eliminated as the order size reached 2,000 units. Within a short period of communicating this new price information to customers, the average order size for all three product families increased to 2,000 units. Required: 1. CONCEPTUAL CONNECTION Grundvig traditionally has expensed order-filling costs. What is the most likely reason for this practice? 2. Calculate the cost per order for each customer category. (Note: Round to two decimal places.) 3. CONCEPTUAL CONNECTION Calculate the reduction in order-filling costs produced by the change in pricing strategy (assuming that resource spending is reduced as much as possible and that the total units sold remain unchanged). Explain how exploiting customer activity information produced this cost reduction. Would any other internal activities benefit from this pricing strategy?
Bienestar Inc., has the following departmental structure for producing a well-known multivitamin: A consultant designed the following cellular manufacturing structure for the same product: The times above the processes represent the time required to process one unit of product. Required: 1. Calculate the time required to produce a batch of 15 bottles using a batch-processing departmental structure. 2. Calculate the time to process 15 units using cellular manufacturing. 3. How much manufacturing time will the cellular manufacturing structure save for a batch of 15 units?
TyeDye Lights makes two products: Party and Holiday. It takes 80,900 direct labor hours to manufacture the Party Line and 93,500 direct labor hours to manufacture the Holiday Line. Overhead consists of $225,000 in the machine setup cost pool and $149,960 in the packaging cost pool. The machine setup pool has 52,000 setups for the Party product and 98,000 setups for the Holiday product. The packaging cost pool has 26,000 parts in the Party product and 39,200 parts for the Holiday product. Using the traditional cost method of direct labor hours, what is the predetermined overhead rate? A. $1.50 per direct labor hour B. $2.15 per direct labor hour C. $2.30 per direct labor hour D. $3.80 per direct labor hour
Lacy, Inc., produces a subassembly used in the production of hydraulic cylinders. The subassemblies are produced in three departments: Plate Cutting, Rod Cutting, and Welding. Materials are added at the beginning of the process. Overhead is applied using the following drivers and activity rates: Other data for the Plate Cutting Department are as follows: Required: 1. Prepare a physical flow schedule. 2. Calculate equivalent units of production for: a. Direct materials b. Conversion costs 3. Calculate unit costs for: a. Direct materials b. Conversion costs c. Total manufacturing 4. Provide the following information: a. The total cost of units transferred out b. The journal entry for transferring costs from Plate Cutting to Welding c. The cost assigned to units in ending inventory
Washington, Inc., makes three models of motorized carts for vacation resorts, X-10, X-20, and X-40. Washington manufactures the carts in two assembly departments: Department A and Department B. All three models are processed initially in Department A, where all material is assembled. The X-10 model is then transferred to finished goods. After processing in Department A, the X-20 and X-40 models are transferred to Department B for final assembly, and then transferred to finished goods. There were no beginning work-in-process inventories on April 1. Data for April are shown in the following table. Ending work in process is 25 percent complete in Department A and 60 percent complete in Department B. Conversion costs are allocated based on the number of equivalent units processed in each department. Total X-10 X-20 X-40 Units started 500 300 200 Units completed in Department A 400 260 180 Units completed in Department B 225…