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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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BuyFindarrow_forward

Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Unit cost analysis
Hathaway Trophies Inc. uses a job order cost system for determining the cost to manufacture award products (plaques and trophies). Among the company's products is an engraved plaque that is awarded to participants who complete an executive education program at a local university. The company sells the plaques to the university for $50 each.
Each plaque has a brass plate engraved with the name of the participant. Engraving requires approximately 30 minutes per name. Improperly engraved names must be redone. The plate is screwed to an oak backboard. This assembly takes approximately 6 minutes per unit. Improper assembly must be redone using a new oak backboard.
During the first half of the year, the university had two separate executive education classes. The job cost sheets for the two separate jobs indicated the following information:


a.Why did the cost per plaque increase from $25.47 to $28.02?
b.Based upon unit costs, what is an area of concern for Hathaway Trophies, Inc.?

To determine

(a)

Concept introduction:

Direct Cost:

The cost which is directly related to the product and affects those items directly, which contributes to the revenue generation in the business is referred as direct cost.

Indirect Cost:

The cost which is not directly related to the product and does not affect those items directly, which contributes to the revenue generation in the business is referred as indirect cost. These can be fixed cost or such costs are incurred as a whole and cannot be make relation to manufacturing cost.

The reason behind increment in the cost per plaque.

Explanation

The reason for the increase in the cost from $25.47 to $28.02 is due to the fact that the production of plaque has been incr

To determine

(b)

Concept introduction:

Direct Cost:

The cost which is directly related to the product and affects those items directly which contributes to the revenue generation in the business is referred as direct cost.

Indirect Cost:

The cost which is not directly related to the product and does not affect those items directly which contributes to the revenue generation in the business is referred as indirect cost. These can be fixed costs or such costs are incurred as a whole and cannot be make relation to manufacturing cost.

The area of concern for HT on the basis of unit costs.

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