Fixed The company has 1,000 units left over from last year's production which have small defects and which will have to be sold at a reduced price as part of a clearance sale provided that it will be refurbished at a cost of P1.50 per unit and there will be a need to purchase a special tool costing P 2,000 which will have no other use other than the refurbishing. Also, 50% of variable selling and administrative costs would have to be incurred to sell the defective units. The sale of the left over might affect the company's regular sale which may decrease by 500 units. Another option that Bacolod has is to simply sell the 1,000 units at its scrap value of P3.00 per unit. Required: 1. How much should be the minimum price per unit of the refurbished units? 2. If the refurbished units can be sold for P10 each, which will be more advantageous for Bacolod, to refurbished or to sell the units at its scrap, and how much is the total advantage? 3. In relation to the previous item, assuming that refurbished units can be sold for P10 each, how much should be the scrap value of the old units for Bacolod to be indifferent?

Fixed The company has 1,000 units left over from last year's production which have small defects and which will have to be sold at a reduced price as part of a clearance sale provided that it will be refurbished at a cost of P1.50 per unit and there will be a need to purchase a special tool costing P 2,000 which will have no other use other than the refurbishing. Also, 50% of variable selling and administrative costs would have to be incurred to sell the defective units. The sale of the left over might affect the company's regular sale which may decrease by 500 units. Another option that Bacolod has is to simply sell the 1,000 units at its scrap value of P3.00 per unit. Required: 1. How much should be the minimum price per unit of the refurbished units? 2. If the refurbished units can be sold for P10 each, which will be more advantageous for Bacolod, to refurbished or to sell the units at its scrap, and how much is the total advantage? 3. In relation to the previous item, assuming that refurbished units can be sold for P10 each, how much should be the scrap value of the old units for Bacolod to be indifferent?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter5: Process Costing

Section: Chapter Questions

Problem 1PB: The following product costs are available for Stellis Company on the production of erasers: direct...

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The following product costs are available for Kellee Company on the production of eyeglass frames: direct materials, $32,125; direct labor, $23.50; manufacturing overhead, applied at 225% of direct labor cost; selling expenses, $22,225; and administrative expenses, $31,125. The direct labor hours worked for the month are 3,200 hours. A. What are the prime costs? B. What are the conversion costs? C. What is the total product cost? D. What is the total period cost? E. If 6.425 equivalent units are produced, what is the equivalent material cost per unit? F. What is the equivalent conversion cost per unit?
Cool Pool has these costs associated with production of 20,000 units of accessory products: direct materials, $70; direct labor, $110; variable manufacturing overhead, $45; total fixed manufacturing overhead, $800,000. What is the cost per unit under both the variable and absorption methods?
The following product costs are available for Stellis Company on the production of erasers: direct materials, $22,000; direct labor, $35,000; manufacturing overhead, $17,500; selling expenses, $17,600; and administrative expenses; $13,400. What are the prime costs? What are the conversion costs? What is the total product cost? What is the total period cost? If 13,750 equivalent units are produced, what is the equivalent material cost per unit? If 17,500 equivalent units are produced, what is the equivalent conversion cost per unit?
SmokeCity, Inc., manufactures barbeque smokers. Based on past experience, SmokeCity has found that its total annual overhead costs can be represented by the following formula: Overhead cost = 543,000 + 1.34X, where X equals number of smokers. Last year, SmokeCity produced 20,000 smokers. Actual overhead costs for the year were as expected. Required: 1. What is the driver for the overhead activity? 2. What is the total overhead cost incurred by SmokeCity last year? 3. What is the total fixed overhead cost incurred by SmokeCity last year? 4. What is the total variable overhead cost incurred by SmokeCity last year? 5. What is the overhead cost per unit produced? 6. What is the fixed overhead cost per unit? 7. What is the variable overhead cost per unit? 8. Recalculate Requirements 5, 6, and 7 for the following levels of production: (a) 19,500 units and (b) 21,600 units. (Round your answers to the nearest cent.) Explain this outcome.
During the week of June 12, Harrison Manufacturing produced and shipped 15,000 units of its aluminum wheels: 3,000 units of Model A and 12,000 units of Model B. The following costs were incurred: Required: 1. Assume initially that the value-stream costs and total units shipped apply only to one model (a single-product value stream). Calculate the unit cost, and comment on its accuracy. 2. Calculate the unit cost for Models A and B, and comment on its accuracy. Explain the rationale for using units shipped instead of units produced in the calculation. 3. What if Model A is responsible for 40 percent of the materials cost? Show how the unit cost would be adjusted for this condition.
Natur-Gro, Inc., manufactures composters. Based on past experience, Natur-Gro has found that its total annual overhead costs can be represented by the following formula: Overhead cost = 264,000 + 1.42X, where X equals number of composters. Last year, Natur-Gro produced 30,000 composters. Actual overhead costs for the year were as expected. Total overhead for per unit was a. 1.42 b. 8.80 c. 11.63 d. 10.22
York Company Is a machine shop that estimated overhead will be $50,000, consisting of 5,000 hours of direct labor. The cost to make job 0325 is $70 in aluminum and two hours of labor at $20 per hour. During the month. York incurs $50 in indirect material cost. $150 in administrative labor, $300 in utilities, and $250 in depreciation expense. What is the predetermined overhead rate if direct labor hours are considered the cost driver? What is the cost of Job 0325? What is the overhead incurred during the month?
During the week of May 10, Hyrum Manufacturing produced and shipped 16,000 units of its aluminum wheels: 4,000 units of Model A and 12,000 units of Model B. The cycle time for Model A is 1.09 hours and for Model B is 0.47 hour. The following costs and production hours were incurred: Required: 1. Assume that the value-stream costs and total units shipped apply only to one model (a single-product value stream). Calculate the unit cost, and comment on its accuracy. 2. Assume that Model A is responsible for 40% of the materials cost. Calculate the unit cost for Models A and B, and comment on its accuracy. Explain the rationale for using units shipped instead of units produced in the calculation. 3. Calculate the unit cost for the two models, using DBC. Explain when and why this cost is more accurate than the unit cost calculated in Requirement 2.
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Algers Company produces dry fertilizer. At the beginning of the year, Algers had the following standard cost sheet: Algers computes its overhead rates using practical volume, which is 54,000 units. The actual results for the year are as follows: a. Units produced: 53,000 b. Direct materials purchased: 274,000 pounds at 2.50 per pound c. Direct materials used: 270,300 pounds d. Direct labor: 40,100 hours at 17.95 per hour e. Fixed overhead: 161,700 f. Variable overhead: 122,000 Required: 1. Compute price and usage variances for direct materials. 2. Compute the direct labor rate and labor efficiency variances. 3. Compute the fixed overhead spending and volume variances. Interpret the volume variance. 4. Compute the variable overhead spending and efficiency variances. 5. Prepare journal entries for the following: a. The purchase of direct materials b. The issuance of direct materials to production (Work in Process) c. The addition of direct labor to Work in Process d. The addition of overhead to Work in Process e. The incurrence of actual overhead costs f. Closing out of variances to Cost of Goods Sold
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