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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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Section
BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Decision making with job order costs

Alvarez Manufacturing Inc. is a job shop. The management of Alvarez Manufacturing Inc. uses the cost Information from the job sheets to assess cost performance. Information on the total cost. product type, and quantity of items produced is as follows:

images

a. Develop a graph for each product (three graphs) wich Job Number (in date order) on the horizontal axis and Unit Cost on the vertical axis. Use chis information to determine Alvarez Manufacturing Inc.’s cost performance over time for the three products.

b. What additional information would you require in order to investigate Alvarez Manufacturing Inc.’s cost performance more precisely?

(a)

To determine

Job order costing

Job order cost system provides a separate record of each particular quantity of product that passes through the factory. Each quantity that is manufactured in the business is known as job. Job order costing is used when the products produced are significantly different from each other.

To determine: cost performance of AM industries by preparing a graph for each product with job number.

Explanation

The table showing unit cost for each job is prepared as follows:

Date Job Number Quantity Product Amount
($)
Unit Cost
($)
(1) (2) (3) (4) (5) (6) = (5) ÷ (3)
Jan-2 1 520 TT 16,120 31.00
Jan-15 22 1,610 SS 20,125 12.50
Feb-03 30 1,420 SS 25,560 18.00
Mar-07 41 670 TT 15,075 22.50
Mar-24 49 2,210 SLK 22,100 10.00
May-19 58 2,550 SLK 31,875 12.50
Jun-12 65 620 TT 10,540 17...

(b)

To determine

To explain: the additional information needed for investigating the AM industry’s cost performance.

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