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 1,900 10,700 12,600 Materials cost $ 20,000 $ 24,000 $ 44,000 Conversion cost 35,000 100,000 135,000 Total $ 55,000 $ 124,000 $ 179,000 Required: Compute the unit costs of M-Solv and C-Solv for July using the current system (job costing) at Bouwens. Compute the cost 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). c.Recommend a costing method that best reflects the cost of producing M-Solv and C-Solv. d. 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.

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 1,900 10,700 12,600 Materials cost $ 20,000 $ 24,000 $ 44,000 Conversion cost 35,000 100,000 135,000 Total $ 55,000 $ 124,000 $ 179,000 Required: Compute the unit costs of M-Solv and C-Solv for July using the current system (job costing) at Bouwens. Compute the cost 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). c.Recommend a costing method that best reflects the cost of producing M-Solv and C-Solv. d. 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.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

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		1,900			10,700		12,600
Materials cost	$	20,000		$	24,000	$	44,000
Conversion cost		35,000			100,000		135,000
Total	$	55,000		$	124,000	$	179,000

Required:

Compute the unit costs of M-Solv and C-Solv for July using the current system (job costing) at Bouwens.
Compute the cost 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).

c.Recommend a costing method that best reflects the cost of producing M-Solv and C-Solv.

d. 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.

Transcribed Image Text: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- C-Solv (B- 159) 10,700 155) Total Units started 1,900 12,600 Materials cost 20,000 35,000 $ 44,000 24,000 100,000 Conversion cost 135,000 Total 55,000 $ 124,000 $ 179,000 Required: a. Compute the unit costs of M-Solv and C-Solv for July using the current system (job costing) at Bouwens. b. Compute the cost 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). c. Recommend a costing method that best reflects the cost of producing M-Solv and C-Solv. d. 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. Req A Reg B Reg C Reg D1 Reg D2 Reg D3 Compute the unit costs of M-Solv and C-Solv for July using the current system (job costing) at Bouwens. (Round "Unit cost" to 2 decimal places.) M-Solv C-Solv (B-159) 124,000 (B-155) Materials costs 55,000 %24 Conversion costs 1,900 Total costs 56,900 $ 124,000 Units produced Unit cost

Req A
Req B
Reg C
Req D1
Req D2
Req D3
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). (Round "Unit cost" to 2 decimal places.)
M-Solv
C-Solv
(B-155)
(B-159)
Total
Materials costs
Conversion costs
Total costs
이 $
Units produced
Unit cost
Req A
Reg B
Req C
Req D1
Req D2
Req D3
Recommend a costing method that best reflects the cost of producing M-Solv and C-Solv.
OJob costing
Operations costing
OProcess costing
Req A
Req B
Reg C
Req D1
Req D2
Req D3
Compute the unit costs for materials and conversion costs separately. (Round "unit cost" to 2 decimal places.)
M-Solv
C-Solv
(B-155)
(B-159)
Materials costs
$
20,000 $
24,000
Units produced
1,900
10,700
Unit cost
$
10.53
$
2.24
Reg A
Req B
Req C
Req D1
Req D2
Reg D3
Then compute conversion costs for the factory. (Round "Unit cost" to 2 decimal places.)
M-Solv
C-Solv
(B-155)
(B-159)
Total
Conversion costs
35,000
100,000 $
135,000
Units produced
1,900
107,000
12,600
Unit cost
$
10.71
< Req D1
Req D3 >
Reg A
Req B
Reg C
Req D1
Reg D2
Req D3
Now, compute the unit product cost. (Round your answers to 2 decimal places.)
M-Solv
C-Solv
(B-155)
(B-159)
Unit materials costs
10.53
$
2.24
Conversion costs
10.71
10.71
Total costs
21.23
$
12.95
< Req D2
Reg D3 >

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 4 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.