Springsteen Company manufactures guitars. The company uses a standard, job-order cost-accounting system in two production departments. In the Construction Department, the wooden guitars are built by highly skilled craftsmen and coated with several layers of lacquer. Then the units are transferred to the Finishing Department, where the bridge of the guitar is attached and the strings are installed. The guitars also are tuned and inspected in the Finishing Department. The diagram below depicts the production process. Construction Department (Basic guitar built from veneered wood.) Finishing Department (Bridge and strings attached; guitar tuned and inspected.) Each finished guitar contains seven pounds of veneered wood. In addition, one pound of wood is typically wasted in the production process. The veneered wood used in the guitars has a standard price of $12 per pound. The other parts needed to complete each guitar, such as the bridge and strings, cost $15 per guitar. The labor standards for Springsteen's two production departments are as follows: Construction Department: 6 hours of direct labor at $20 per hour Finishing Department: 3 hours of direct labor at $15 per hour The following pertains to the month of July. 1. There were no beginning or ending work-in-process inventories in either production department. 2. There was no beginning finished-goods inventory. 3. Actual production was 576 guitars, and 376 guitars were sold on account for $400 each. 4. The company purchased 6,950 pounds of veneered wood at a price of $12.50 per pound. 5. Actual usage of veneered wood was 5,450 pounds of the wood purchased during July. 6. Enough parts (bridges and strings) to finish 676 guitars were purchased at a cost of $10,140. 7. The Construction Department used 3,325 direct-labor hours. The total direct-labor cost in the Construction Department was $63,175. 8. The Finishing Department used 1,798 direct-labor hours. The total direct-labor cost in that department was $28,768. 9. There were no direct-material variances in the Finishing Department.

Springsteen Company manufactures guitars. The company uses a standard, job-order cost-accounting system in two production departments. In the Construction Department, the wooden guitars are built by highly skilled craftsmen and coated with several layers of lacquer. Then the units are transferred to the Finishing Department, where the bridge of the guitar is attached and the strings are installed. The guitars also are tuned and inspected in the Finishing Department. The diagram below depicts the production process. Construction Department (Basic guitar built from veneered wood.) Finishing Department (Bridge and strings attached; guitar tuned and inspected.) Each finished guitar contains seven pounds of veneered wood. In addition, one pound of wood is typically wasted in the production process. The veneered wood used in the guitars has a standard price of $12 per pound. The other parts needed to complete each guitar, such as the bridge and strings, cost $15 per guitar. The labor standards for Springsteen's two production departments are as follows: Construction Department: 6 hours of direct labor at $20 per hour Finishing Department: 3 hours of direct labor at $15 per hour The following pertains to the month of July. 1. There were no beginning or ending work-in-process inventories in either production department. 2. There was no beginning finished-goods inventory. 3. Actual production was 576 guitars, and 376 guitars were sold on account for $400 each. 4. The company purchased 6,950 pounds of veneered wood at a price of $12.50 per pound. 5. Actual usage of veneered wood was 5,450 pounds of the wood purchased during July. 6. Enough parts (bridges and strings) to finish 676 guitars were purchased at a cost of $10,140. 7. The Construction Department used 3,325 direct-labor hours. The total direct-labor cost in the Construction Department was $63,175. 8. The Finishing Department used 1,798 direct-labor hours. The total direct-labor cost in that department was $28,768. 9. There were no direct-material variances in the Finishing Department.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter6: Process Costing

Section: Chapter Questions

Problem 14E: Lacy, Inc., produces a subassembly used in the production of hydraulic cylinders. The subassemblies...

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