Concept explainers
The Savannah Shirt Company makes two types of T-shirts: basic and custom. Basic shirts are plain shirts without any screen printing on them. Custom shirts are created using the basic shirts and then adding a custom screen printing design.
I he company buys cloth in various colors and then makes the basic shirts in two departments, Cutting and Sewing. The company uses a
The Custom Design Department creates custom shirts. In adding the basic shirt. The department creates a design based on the customer’s request and then print to four colors. Because these shirts lave the custom printing added, which is unique for each order, the additional cost incurred is determined using
Department | Item | Amount | Units |
Cutting | Beginning balance Started in March |
$ o |
0 shirts 1,500 shirts |
Direct materials added in March | 4,905 | ||
Conversion costs | 2,445 | ||
Completed and transferred to Sewing | ??? | 1,500 shirts | |
Ending balance | 0 | 0 shirts | |
Sewing | Beginning balance, transferred in, $1,225; conversion costs, $300 | 1,525 | 250 shirts |
Transferred in from Cutting | ??? | ??? | |
Conversion costs added in March | $ 1,650 | ||
Completed and transferred to Finished Goods | ??? | 1,250 shirts | |
Ending balance, 75% complete | ??? | ??? |
For the same time period, the Savannah Shirt Company compiled the following data for the Custom Design Department:
Job | Quantity | Design Fee | Printing | Status |
367 | 50 | Yes | 4 colors | Complete |
368 | 250 | No | 2 colors | Complete |
369 | 1 50 | Yes | 3 colors | Complete |
370 | 100 | Yes | 2 colors | Complete |
The Savannah Shirt Company has previously determined that creating and programming the design cost $75 per design. This is a one-time charge. If a customer places another order with the same design, the customer is not charged a second time. Additionally, the cost to print is $0.50 per color per shirt.
Requirements
- Complete a production cost report for the Cutting Department and the Sewing Department. What is the cost of one basic shirt?
- Determine the total cost and the average cost per shirt for jobs 367, 368, 369, and 370. If the company set the sales price at 160% of the total cost, determine the total sales price of each job.
- In addition to the custom jobs, the Savannah Shirt Company sold 1,250 basic shirts (assume the beginning balance in Finished Goods Inventory is sufficient to make these sales, and the unit cost of the basic shirts in Finished Goods Inventory is the same as the unit cost incurred this month). If the company set the sales price at 140% of the cost, determine the sales price per unit, total sales revenue, and the total cost of goods sold for the basic shirts.
- Calculate the total revenue and total cost of goods sold for all sales, basic and custom.
- - Assume the company sold only basic shins (no custom design) and incurred fixed costs of $1,403 per month.
- Calculate die contribution margin per unit, contribution margin ratio, required sales in units to break even, and required sales in dollars 10 break even
- Determine the margin of safety in units and dollars
- Graph Savannah Shirt Company's CVP relationships. Show the breakeven point, the sales revenue line, the fixed cost line, the total cost line, the operating loss area, and the operating income area.
- Suppose the Savannah Shirt Company wants to earn an operating income of $4,100 per month. Compute die required sales in units and dollar to achieve this profit goal.
- The Savannah Shirt Company is considering adding a new product line, a cloth shopping bag with custom screen priming that will be sold to grocery stores. If the current market price of cloth shopping hags is $1.25 and the company desires a net profit of 40%, what is the target cost? The company estimates the full product cost of the cloth bags will be $0.60. Should the company manufacture die cloth bags? Why or why not?
Want to see the full answer?
Check out a sample textbook solutionChapter 21 Solutions
Horngren's Accounting, Student Value Edition (11th Edition)
- hermal Rising, Inc., makes paragliders for sale through specialty sporting goods stores. The company has a standard paraglider model, but also makes custom-designed paragliders. Management has designed an activity-based costing system with the following activity cost pools and activity rates: Activity Cost Pool Activity Rate Supporting direct labor $22 per direct labor-hour Order processing $182 per order Custom design processing $254 per custom design Customer service $428 per customer Management would like an analysis of the profitability of a particular customer, Big Sky Outfitters, which has ordered the following products over the last 12 months: StandardModel CustomDesign Number of gliders 10 3 Number of orders 1 3 Number of custom designs 0 3 Direct labor-hours per glider 27.50 34.00 Selling price per glider $1,650 $2,310 Direct materials cost per glider $ 458 The company’s direct labor rate is $18 per hour. Required:…arrow_forwardConcord, Ltd. manufactures shirts, which it sells to customers for embroidering with various slogans and emblems. The standard cost card for the shirts is as follows. Standard Price Standard Quantity Standard Cost Direct materials $3 per yard 2.00 yards $6.00 Direct labor $14 per DLH 0.75 DLH 10.50 Variable overhead $3.20 per DLH 0.75 DLH 2.40 Fixed overhead $3 per DLH 0.75 DLH 2.25 $21.15 Sandy Robison, operations manager, was reviewing the results for November when he became upset by the unfavorable variances he was seeing. In an attempt to understand what had happened, Sandy asked CFO Suzy Summers for more information. She provided the following overhead budgets, along with the actual results for November.The company purchased 82,100 yards of fabric and used 93,700 yards of fabric during the month. Fabric purchases during the month were made at $2.80 per yard. The direct labor payroll ran…arrow_forwardMaxion Jantaş is a manufactures of aluminum wheel for cars and they are currentlyproducing wheels in their Manisa plant. During the production, wheels first go throughassembly department and then proceed to testing department. The company is using aprocess costing system which has a single direct‐cost category, direct materials, and a singleindirect‐cost category, conversion costs, for the assembly department. Conversion costsare added evenly during the process whereas direct materials are added at the beginningof the process. Furthermore, the company is using the weighted‐average method ofprocess costing. Data for the assembly department for August 2018 are as follows: 1. Calculate total costs assigned to completed and transferred out units and workingprocess ending units using the current process costing method. (weighted averagemethod) Show each step of the five‐step approach and your calculations clearly.2. Assume the company is using FIFO method of process costing. Calculate total…arrow_forward
- Thermal Rising, Inc., makes paragliders for sale through specialty sporting goods stores. The company has a standard paraglider model, but also makes custom-designed paragliders. Management has designed an activity-based costing system with the following activity cost pools and activity rates: Activity Cost Pool Activity Rate Supporting direct labor $ 20 per direct labor-hour Order processing $ 200 per order Custom design processing $ 258 per custom design Customer service $ 424 per customer Management would like an analysis of the profitability of a particular customer, Big Sky Outfitters, which has ordered the following products over the last 12 months: StandardModel CustomDesign Number of gliders 15 3 Number of orders 2 3 Number of custom designs 0 3 Direct labor-hours per glider 29.50 31.00 Selling price per glider $ 1,700 $ 2,370 Direct materials cost per glider $ 444 $ 576 The company’s direct labor rate is $18 per…arrow_forwardKota Toy Corporation manufactures lizard dolls in two departments, Molding and Assembly. In the Molding Department, plastic is injected into a lizard-shaped mold. The dolls that come out of the molds are then transferred to the Assembly Department where hair is applied. Kota uses a weighted-average process cost system to collect costs in both departments. On January 1, the Molding Department had 4,000 dolls in process. These dolls were 100% complete with respect to direct materials and 70% complete with respect to conversion cost. During January, Molding completed 79,000 dolls. On January 31, Molding had 7,000 dolls in work in process. These dolls were 100% complete with respect to direct materials and 25% complete with respect to conversion cost. What are the Molding Department's equivalent units related to materials for January? 86,000 93,000 79,000 89,000arrow_forwardKota Toy Corporation manufactures lizard dolls in two departments, Molding and Assembly. In the Molding Department, plastic is injected into a lizard-shaped mold. The dolls that come out of the molds are then transferred to the Assembly Department where hair is applied. Kota uses a weighted-average process cost system to collect costs in both departments. On January 1, the Molding Department had 4,000 dolls in process. These dolls were 100% complete with respect to direct materials and 70% complete with respect to conversion cost. During January, Molding completed 79,000 dolls. On January 31, Molding had 7,000 dolls in work in process. These dolls were 100% complete with respect to direct materials and 25% complete with respect to conversion cost. What are the Molding Department's equivalent units related to conversion costs for January?77,95080,75084,25083,750arrow_forward
- Kota Toy Corporation manufactures lizard dolls in two departments, Molding and Assembly. In the Molding Department, plastic is injected into a lizard-shaped mold. The dolls that come out of the molds are then transferred to the Assembly Department where hair is applied. Kota uses a weighted-average process cost system to collect costs in both departments.On January 1, the Molding Department had 4,000 dolls in process. These dolls were 100% complete with respect to direct materials and 70% complete with respect to conversion cost. During January, Molding completed 79,000 dolls. On January 31, Molding had 7,000 dolls in work in process. These dolls were 100% complete with respect to direct materials and 25% complete with respect to conversion cost. What account would Kota debit to record the transfer of dolls out of the Molding Department? Work in Process -- Molding Work in Process -- Assembly Manufacturing Overhead Finished Goodsarrow_forwardKota Toy Corporation manufactures lizard dolls in two departments, Molding and Assembly. In the Molding Department, plastic is injected into a lizard-shaped mold. The dolls that come out of the molds are then transferred to the Assembly Department where hair is applied. Kota uses a weighted-average process cost system to collect costs in both departments.On January 1, the Molding Department had 4,000 dolls in process. These dolls were 100% complete with respect to direct materials and 70% complete with respect to conversion cost. During January, Molding completed 79,000 dolls. On January 31, Molding had 7,000 dolls in work in process. These dolls were 100% complete with respect to direct materials and 25% complete with respect to conversion cost. What account would Kota debit to record the transfer of dolls out of the Molding Department?arrow_forwardKota Toy Corporation manufactures lizard dolls in two departments, Molding and Assembly. In the Molding Department, plastic is injected into a lizard-shaped mold. The dolls that come out of the molds are then transferred to the Assembly Department where hair is applied. Kota uses a weighted-average process cost system to collect costs in both departments.On January 1, the Molding Department had 4,000 dolls in process. These dolls were 100% complete with respect to direct materials and 70% complete with respect to conversion cost. During January, Molding completed 79,000 dolls. On January 31, Molding had 7,000 dolls in work in process. These dolls were 100% complete with respect to direct materials and 25% complete with respect to conversion cost. What are the Molding Department's equivalent units related to conversion costs for January?arrow_forward
- Coronado, Ltd. manufactures shirts, which it sells to customers for embroidering with various slogans and emblems. The standard cost card for the shirts is as follows. Standard Price Standard Quantity Standard Cost Direct materials $3 per yard 2.00 yards $6.00 Direct labor $14 per DLH 0.75 DLH 10.50 Variable overhead $3.20 per DLH 0.75 DLH 2.40 Fixed overhead $3 per DLH 0.75 DLH 2.25 $21.15 Sandy Robison, operations manager, was reviewing the results for November when he became upset by the unfavorable variances he was seeing. In an attempt to understand what had happened, Sandy asked CFO Suzy Summers for more information. She provided the following overhead budgets, along with the actual results for November.The company purchased 82,400 yards of fabric and used 94,000 yards of fabric during the month. Fabric purchases during the month were made at $2.80 per yard. The direct labor payroll ran…arrow_forwardThermal Rising, Incorporated, makes paragliders for sale through specialty sporting goods stores. The company has a standard paraglider model, but also makes custom-designed paragliders. Management has designed an activity-based costing system with the following activity cost pools and activity rates: Activity Cost Pool Activity Rate Supporting direct labor $ 16 per direct labor-hour Order processing $ 190 per order Custom design processing $ 253 per custom design Customer service $ 430 per customer Management would like an analysis of the profitability of a particular customer, Big Sky Outfitters, which has ordered the following products over the last 12 months: Standard Model Custom Design Number of gliders 11 3 Number of orders 2 3 Number of custom designs 0 3 Direct labor-hours per glider 28.50 31.00 Selling price per glider $ 1,800 $ 2,420 Direct materials cost per glider $ 480 $ 568 The company’s direct labor rate is $22 per hour.…arrow_forwardCape Cod Shirt Shop manufactures T-shirts and decorates them with custom designs for retail sale on the premises. Several costs incurred by the company are listed below. For each cost, indicate which of the following classifications best describe the cost. More than one classification may apply to the same cost item. Cost Classifications Variable Fixed Period Product Administrative Selling Manufacturing Research and Development Direct material Direct labor Manufacturing overhead Cost Items: Cost of fabric used in T-shirts Wages of shirtmakers Cost of new sign in front of retail T-shirt shop Wages of employee who repairs the firms sewing machines Cost of electricity used in the sewing department Wages of T-shirt designers and painters Wages of sales personnel Depreciation on sewing machines Rent on the building that is used to make and paint T-shirts Cost of daily advertisements in local media Wages of designers who experiment with new fabrics, paints and T-shirt designs Cost of…arrow_forward
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage LearningManagerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage LearningPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub