FINANCIAL ACCOUNTING
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ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Transcribed Image Text:Decision Making
Lasting Memories Inc. produces photographic paper for printing digital images. One of the processes for this operation is a coating (solvent spreading)
operation, where chemicals are coated onto paper stock. There has been some concern about the cost performance of this operation. As a result, you have
begun an investigation. You first discover that all materials and conversion prices have been stable for the last six months. Thus, increases in prices for inputs
are not an explanation for increasing costs. However, you have discovered three possible problems from some of the operating personnel whose quotes follow:
Operator 1: "I've been keeping an eye on my operating room instruments. I feel as though our energy consumption is becoming less efficient."
Operator 2: "Every time the coating machine goes down, we produce waste on shutdown and subsequent startup. It seems like during the last half year we
have had more unscheduled machine shutdowns than in the past. Thus, I feel as though our yields must be dropping."
Operator 3: "My sense is that our coating costs are going up. It seems to me like we are spreading a thicker coating than we should. Perhaps the coating
machine needs to be recalibrated."
The Coating Department had no beginning or ending inventories for any month during the study period. The following data from the cost of production report
are made available:
A
Paper stock
Coating
Conversion cost (incl. energy)
Pounds input to the process
Pounds transferred out
B
C
D
E
F
G
April May June July August September
$72,960 $69,120 $76,800 $69,120 $65,280
$16,416 $17,280 $21,120 $21,600 $21,216
$36,480 $34,560 $38,400 $34,560 $32,640
95,000 90,000 100,000 90,000 85,000
91,200 86,400 96,000 86,400 81,600
$61,440
$23,040
$30,720
80,000
76,800
Transcribed Image Text:Complete the table showing the paper cost per output pound, coating cost per output pound, conversion cost per output pound, and yield for each month.
Round dollar amounts to the nearest cent.
Paper stock ($/pounds output)
Coating ($/pounds output)
Conversion cost ($/pounds output)
Yield (pounds transferred out/pounds input)
Feedback
June
July
$
$
ÅÅÅÅÅÅ
$
$
$
$
%
$
Lasting Memories Inc.
$
April
%
$
$
$
May
%
%
$
August
%
$
Sept.
%
Check My Work
(a) Remember that the cost-per-pound information is determined by dividing the costs by the pounds transferred out. The yield is determined by
dividing the pounds transferred out by the pounds input.
Based on the given formula, prepare a table showing the paper cost per output pound, coating cost per output pound, conversion cost per output
pound, and yield for each month.
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