Bouwens Corporation manufactures a solvent used in airplane maintenance shops. Bouwens sells the solvent to both U.S. military services and commercial airlines. The solvent is produced in a single plant in one of two buildings. Although the solvent sold to the military is chemically identical to that sold to the airlines, the company produces solvent for the two customer types in different buildings at the plant. The solvent sold to the military is manufactured in building 155 (B-155) and is labeled M-Solv. The solvent sold to the commercial airlines is manufactured in building 159 (B-159) and is labeled C-Solv. B-155 is much newer and is considered a model work environment with climate control and other amenities. Workers at Bouwens, who all have roughly equal skills, bid on their job locations (the buildings they will work in) and are assigned based on bids and seniority. As workers gain seniority, they also receive higher pay. The solvent sold to the two customers is essentially identical, but the military requires Bouwens to use a base chemical with a brand name, MX. The solvent for the commercial airlines is called CX. MX is required for military applications because it is sold by vendors on a preferred vendor list. The company sells solvent for the market price to the airlines. Solvent sold to the military is sold based on cost plus a fixed fee. That is, the government pays Bouwens for the recorded cost of the solvent plus a fixed amount of profit. The cost can be computed according to "commonly used product cost methods, including job costing or process costing methods using either FIFO or weighted-average methods." Competition for the government business is very strong, and Bouwens is always looking for ways to reduce the cost and the price it quotes the government. Currently, Bouwens uses a job costing system in which each month’s production for each customer type is considered a "job." Thus, every month, Bouwens starts and completes one job in B-155 and one job in B-159. (There is never any beginning or ending work in process at Bouwens.) Recently, a dispute arose between Jack, the product manager for the military solvent, and Jill, the product manager for the commercial solvent, over the proper costing system. Jack: It is ridiculous to use job costing for this. We are producing solvent. Everyone knows that the chemicals are the same. The fact the B-155 has high-cost labor is because all the senior employees want to work there. We could produce the same product with the employees in B-159. We should be using process costing and consider all the production in both buildings for each month as the batch. Jill: Jack, the fact is that the military requires us to use a special chemical, and their contracts require we keep track of the costs for their business. If we don’t separate the costing, we won’t know how profitable either business is. The following is production and cost information for a typical month, July.   M-Solv (B-155) C-Solv (B-159) Total Units started 2,000 10,000 12,000 Materials cost $ 14,000 $ 40,000 $ 54,000 Conversion cost 30,000 120,000 150,000 Total $ 44,000 $ 160,000 $ 204,000 Required: Compute the unit costs of M-Solv and C-Solv for July using the current system (job costing) at Bouwens. Compute the costs of M-Solv and C-Solv for July if Bouwens were to treat all production as the same (combining B-155 and B-159 production). Recommend a costing method that best reflects the cost of producing M-Solv and C-Solv. For your recommended costing system, compute the cost of both M-Solv and C-Solv for July. Compute the unit costs for materials and conversion costs separately. Then compute conversion costs for the factory. Now, compute the unit product cost.

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Bouwens Corporation manufactures a solvent used in airplane maintenance shops. Bouwens sells the solvent to both U.S. military services and commercial airlines. The solvent is produced in a single plant in one of two buildings. Although the solvent sold to the military is chemically identical to that sold to the airlines, the company produces solvent for the two customer types in different buildings at the plant. The solvent sold to the military is manufactured in building 155 (B-155) and is labeled M-Solv. The solvent sold to the commercial airlines is manufactured in building 159 (B-159) and is labeled C-Solv.

B-155 is much newer and is considered a model work environment with climate control and other amenities. Workers at Bouwens, who all have roughly equal skills, bid on their job locations (the buildings they will work in) and are assigned based on bids and seniority. As workers gain seniority, they also receive higher pay.

The solvent sold to the two customers is essentially identical, but the military requires Bouwens to use a base chemical with a brand name, MX. The solvent for the commercial airlines is called CX. MX is required for military applications because it is sold by vendors on a preferred vendor list.

The company sells solvent for the market price to the airlines. Solvent sold to the military is sold based on cost plus a fixed fee. That is, the government pays Bouwens for the recorded cost of the solvent plus a fixed amount of profit. The cost can be computed according to "commonly used product cost methods, including job costing or process costing methods using either FIFO or weighted-average methods." Competition for the government business is very strong, and Bouwens is always looking for ways to reduce the cost and the price it quotes the government.

Currently, Bouwens uses a job costing system in which each month’s production for each customer type is considered a "job." Thus, every month, Bouwens starts and completes one job in B-155 and one job in B-159. (There is never any beginning or ending work in process at Bouwens.) Recently, a dispute arose between Jack, the product manager for the military solvent, and Jill, the product manager for the commercial solvent, over the proper costing system.

Jack: It is ridiculous to use job costing for this. We are producing solvent. Everyone knows that the chemicals are the same. The fact the B-155 has high-cost labor is because all the senior employees want to work there. We could produce the same product with the employees in B-159. We should be using process costing and consider all the production in both buildings for each month as the batch.

Jill: Jack, the fact is that the military requires us to use a special chemical, and their contracts require we keep track of the costs for their business. If we don’t separate the costing, we won’t know how profitable either business is.

The following is production and cost information for a typical month, July.

  M-Solv (B-155) C-Solv (B-159) Total
Units started 2,000 10,000 12,000
Materials cost $ 14,000 $ 40,000 $ 54,000
Conversion cost 30,000 120,000 150,000
Total $ 44,000 $ 160,000 $ 204,000

Required:

  1. Compute the unit costs of M-Solv and C-Solv for July using the current system (job costing) at Bouwens.
  2. Compute the costs of M-Solv and C-Solv for July if Bouwens were to treat all production as the same (combining B-155 and B-159 production).
  3. Recommend a costing method that best reflects the cost of producing M-Solv and C-Solv.
  4. For your recommended costing system, compute the cost of both M-Solv and C-Solv for July.
  1. Compute the unit costs for materials and conversion costs separately.
  2. Then compute conversion costs for the factory.
  3. Now, compute the unit product cost.
**Instruction: Compute Conversion Costs**

1. Navigate between requirements using the tabs labeled: Req A, Req B, Req C, Req D1, Req D2, and Req D3.

2. Task: Calculate the conversion costs for the factory. 

   - **Note:** Ensure the "Unit cost" is rounded to two decimal places.

3. Input Field: Enter the unit cost in the provided textbox.

4. Navigation: Use the buttons below the input field to move to the previous or next requirement:
   - `< Req D1`
   - `Req D3 >`
   
These steps guide users through computing and inputting necessary data for unit cost analysis within a structured factory setting.
Transcribed Image Text:**Instruction: Compute Conversion Costs** 1. Navigate between requirements using the tabs labeled: Req A, Req B, Req C, Req D1, Req D2, and Req D3. 2. Task: Calculate the conversion costs for the factory. - **Note:** Ensure the "Unit cost" is rounded to two decimal places. 3. Input Field: Enter the unit cost in the provided textbox. 4. Navigation: Use the buttons below the input field to move to the previous or next requirement: - `< Req D1` - `Req D3 >` These steps guide users through computing and inputting necessary data for unit cost analysis within a structured factory setting.
**Instruction for Unit Product Cost Calculation:**

**3. Now, compute the unit product cost.**

*Note: Round your answers to 2 decimal places.*

---

**Cost Components Table:**

|                       | M-Solv (B-155) | C-Solv (B-159) |
|-----------------------|----------------|----------------|
| **Unit materials costs** |                |                |
| **Unit conversion costs** |                |                |
| **Total unit costs**     |                |                |

---

**Navigation:**

- `< Req D2` (Previous Requirement)
- `Req D3 >` (Next Requirement) [Disabled]

---

In this exercise, you are required to compute the unit product costs for the products M-Solv (B-155) and C-Solv (B-159). Fill in the table with the accurate calculation of costs, considering both materials and conversion costs.
Transcribed Image Text:**Instruction for Unit Product Cost Calculation:** **3. Now, compute the unit product cost.** *Note: Round your answers to 2 decimal places.* --- **Cost Components Table:** | | M-Solv (B-155) | C-Solv (B-159) | |-----------------------|----------------|----------------| | **Unit materials costs** | | | | **Unit conversion costs** | | | | **Total unit costs** | | | --- **Navigation:** - `< Req D2` (Previous Requirement) - `Req D3 >` (Next Requirement) [Disabled] --- In this exercise, you are required to compute the unit product costs for the products M-Solv (B-155) and C-Solv (B-159). Fill in the table with the accurate calculation of costs, considering both materials and conversion costs.
Expert Solution
Step 1: Introduction of Job costing, Process costing and Operating costing

As per the Honor code of Bartleby we are bound to give the answer of the first three sub parts only, Please post the remaining sub part again Our other experts will assist you with that.

Job Costing: Accounting technique that tracks the cost of materials, labor, and overhead for a particular job. The main purpose of job costing is to determine the profit or loss of each job. Repetitive work or poorly allocated employees can be addressed for the upcoming project through job costs.

Process costing : 

Operation costing method employed to determine the value of a product at each process or stage of the production process, applicable where goods produced from a series of continuous operations or procedures.  Process costing is employed by businesses that manufacture goods and where production is in repetitive inflow.

The given diagram explains the process costing system in which a product has to go through different processes before it becomes the final product. Initially raw material is added to the first process and any additional costs like direct labor and manufacturing overhead is also added to it. Output from the first process is transferred to the next process. In the next process again, some extra costs like material, labor and other overheads may apply to the unfinished product. This process may be repeated until the final process after which the product becomes the final product and is ready for sale. In process costing, costs are assigned to each production process rather than to individual units or batches of products.


Operating costing : It combines the features of job costing and process costing wherein cost can be identified by preparing the cost sheet.

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