4. Currently, the three types of fabrics are produced simultaneously in different locations of the fabric plant using similar processes. Process costing methods are used to determine the unit cost of each fabric. Historically, the plant has never fully utilized any of the three processes. The maximum historical utilization of the capacity has been about 50 percent. Juana Sandoval, the fabric plant manager, is confident that the three operations can be consolidated in a way that there would be sufficient capacity to produce all three fabrics while capturing significant savings by reducing labor and overhead costs. In fact, total direct labor and variable overhead costs would be reduced by 25 percent and fixed overhead costs by 50 percent. Production of the three fabrics can be managed by using a batch production approach; however, one problem is that the yarn used for each fabric differs significantly in cost. Conversion activity is the same for each fabric regardless of the type of yarn. The cost accounting manager has assembled the following budgeted annual data for each process that reflects the expected reductions: Weaving and Pattern Coloring and Bolting Conversion cost $900,000 $570,000 Expected activity (direct labor hours) 60,000 30,000 a. Calculate the conversion rate for each process using direct labor hours (round to whole dollars): Weaving and Pattern Process: Coloring and Bolting Process: b. Assume a batch of 400 bolts of FB70 is produced. The cost of yarn requisitioned for the batch is $40,000. The batch used 2,550 direct labor hours in Weaving and Pattern and 1,200 hours in Coloring and Bolting. In Coloring and Bolting, another $10,000 of materials (dyes) were requisitioned for the batch. Calculate the cost per bolt for the production run of 400 bolts (round to the nearest cent).
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
4. Currently, the three types of fabrics are produced simultaneously in different locations of the fabric plant using similar processes.
| Weaving and Pattern | Coloring and Bolting | |
| Conversion cost | $900,000 | $570,000 |
| Expected activity (direct labor hours) | 60,000 | 30,000 |
a. Calculate the conversion rate for each process using direct labor hours (round to whole dollars):
Weaving and Pattern Process:
Coloring and Bolting Process:
b. Assume a batch of 400 bolts of FB70 is produced. The cost of yarn requisitioned for the batch is $40,000. The batch used 2,550 direct labor hours in Weaving and Pattern and 1,200 hours in Coloring and Bolting. In Coloring and Bolting, another $10,000 of materials (dyes) were requisitioned for the batch. Calculate the cost per bolt for the production run of 400 bolts (round to the nearest cent).
$
5. In the Coloring and Bolting Department, 400,000 ounces of other materials were purchased and used to produce Fabric FB70's output of the period.
a. Using the proposed
Enter all amounts as positive numbers.
| i. Materials price variance (for other materials only) |
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| ii. Materials usage variance (for other materials only) |
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| iii. Labor rate variance |
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| iv. Labor efficiency variance |
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