Boulder Toys manufactures powered, ride-on tractors and other equipment for children. There are three models, increasing in features and detail: XL, XLS, and XLT. All three models start in the Assembly Department, where the raw material is shaped and components, such as tires and motor, are assembled. The XL and XLS model are then sent to the Packaging Department where they are made ready for delivery to dealers. The XLT model is sent from the Assembly Department to the Customization Department where it is detailed with various special order paints and logos. Boulder Toys uses operations costing and conversion costs are allocated to products based on the number of units produced. No work-in-process inventories exist in any of the three departments. Data for October follow: Total Units produced 3,800 XL 1,800 XLS XLT 1,350 650 Costs: Materials $ 559,150 $156,600 $ 180,900 $221,650 Conversion costs Assembly $ 307,800 Customization Packaging Total conversion cost 27,950 72,200 $ 407,950 Required: What is the cost per unit transferred to finished goods inventory for each of the three models in October? XL XLS XLT Cost per unit $ 191 $ 238 $ 465

Boulder Toys manufactures powered, ride-on tractors and other equipment for children. There are three models, increasing in features and detail: XL, XLS, and XLT. All three models start in the Assembly Department, where the raw material is shaped and components, such as tires and motor, are assembled. The XL and XLS model are then sent to the Packaging Department where they are made ready for delivery to dealers. The XLT model is sent from the Assembly Department to the Customization Department where it is detailed with various special order paints and logos. Boulder Toys uses operations costing and conversion costs are allocated to products based on the number of units produced. No work-in-process inventories exist in any of the three departments. Data for October follow: Total Units produced 3,800 XL 1,800 XLS XLT 1,350 650 Costs: Materials $ 559,150 $156,600 $ 180,900 $221,650 Conversion costs Assembly $ 307,800 Customization Packaging Total conversion cost 27,950 72,200 $ 407,950 Required: What is the cost per unit transferred to finished goods inventory for each of the three models in October? XL XLS XLT Cost per unit $ 191 $ 238 $ 465

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Description: Boulder Toys manufactures powered, ride-on tractors and other equipment for children. There are three models, increasing in featuresand detail: XL, XLS, and XLT. All three models start in the Assembly Department, where the raw material is shaped and

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter8: Budgeting For Planning And Control

Section: Chapter Questions

Problem 26E: Ingles Corporation is a manufacturer of tables sold to schools, restaurants, hotels, and other...

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Clearview Window Company manufactures windows for the home-building industry. The window frames are produced in the Frame Division. The frames are then transferred to the Glass Division, where the glass and hardware are installed. The company’s best-selling product is a three-by-four-foot, doublepaned operable window. The Frame Division also can sell frames directly to custom home builders, who install the glass and hardware. The sales price for a frame is $80. The Glass Division sells its finished windows for $190. The markets for both frames and finished windows exhibit perfect competition. The standard variable cost of the window is detailed as follows: Frame Division Glass Division Direct material $ 15 $ 30 * Direct labor 20 15 Variable overhead 30 30 Total $ 65 $ 75 *Not including the transfer price for the frame. Assume that there is no excess capacity in the Frame Division. Required: 1-a. Use the general rule to compute the transfer price for window frames. 1-b. Calculate the…
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…
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Quality Clothing, Inc., produces skorts and jumper uniforms for schoolchildren. In the process of cutting out the cloth pieces for each product, a certain amount of scrap cloth is produced. Quality has been selling this cloth scrap to Jorges Scrap Warehouse for $3.25 per pound. Last year, the company sold 40,000 lb. of scrap, which would be enough to make 10,000 teddy bears that the management of Quality is now interested in producing. Their processes would need some reprogramming, particularly in the cutting and stitching processes, but it would require no additional worker training. However, new packaging would be needed. The total variable cost to produce the teddy bears $3.85. Fixed costs would increase by $95,000 per year for the lease of the packaging equipment and Quality estimates it could produce and sell 10,000 teddy bears per year. Finished teddy bears could be sold for $18.00 each. Should Quality continue to sell the scrap cloth or should Quality process the scrap into teddy bears to sell?
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 handles. The limbs pass through four sequential processes before reaching final assembly: layup, molding, fabricating, and finishing. In the layup department, limbs are created by laminating layers of wood. In the molding department, the limbs are heat-treated, under pressure, to form strong resilient limbs. In the fabricating department, any protruding glue or other processing residue is removed. Finally, in the finishing department, 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% 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 material input. Aaron: Your predecessor is responsible. He believed that tracking the difference in 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 BWIP; however, there were 300 units in EWIP: 200 Deluxe and 100 Econo models. Both models were 80% complete with respect to conversion costs and 100% complete with respect to materials. c. The pattern department experienced the following costs: d. On an experimental basis, the requisition forms for materials were modified to identify the dollar value of the 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. Round unit cost to two decimal places. 2. Compute the unit cost of each handle, using the separate cost information provided on materials. Round unit cost to two decimal places. 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 minus manufacturing cost) is so low. Given the results in Requirements 1 through 3, was Aaron justified in his position?
Ingles Corporation is a manufacturer of tables sold to schools, restaurants, hotels, and other institutions. The table tops are manufactured by Ingles, but the table legs are purchased from an outside supplier. The Assembly Department takes a manufactured table top and attaches the four purchased table legs. It takes 16 minutes of labor to assemble a table. The company follows a policy of producing enough tables to ensure that 40 percent of next months sales are in the finished goods inventory. Ingles also purchases sufficient materials to ensure that materials inventory is 60 percent of the following months scheduled production. Ingless sales budget in units for the next quarter is as follows: Ingless ending inventories in units for July 31 are as follows: Required: 1. Calculate the number of tables to be produced during August. 2. Disregarding your response to Requirement 1, assume the required production units for August and September are 2,100 and 1,900, respectively, and the July 31 materials inventory is 4,000 units. Compute the number of table legs to be purchased in August. 3. Assume that Ingles Corporation will produce 2,340 units in September. How many employees will be required for the Assembly Department in September? (Fractional employees are acceptable since employees can be hired on a part-time basis. Assume a 40-hour week and a 4-week month.) (CMA adapted)
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?
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.
Johnny Lee Incorporated produces a line of small gasoline-powered engines that can be used in a variety of residential machines, ranging from different types of lawnmowers, to snowblowers, to garden tools (such as tillers and weed-whackers). The basic product line consists of three different models, each meant to fill the needs of a different market. Assume you are the cost accountant for this company and that you have been asked by the owner of the company to construct a flexible budget for factory overhead costs, which seem to be growing faster than revenues. Currently, the company uses machine hours (MHs) as the basis for assigning both variable and fixed factory overhead costs to products. Within the relevant range of output, you determine that the following factory fixed overhead costs per month should occur: engineering support, $15,200; insurance on the manufacturing facility, $5,200; property taxes on the manufacturing facility, $12,200; depreciation on manufacturing…