**Case Study: Optiplex Corporation's Custom-Design Generators Inventory Reporting****Context:**Due to an economic downturn, Optiplex Corporation has surplus production capacity. On January 1, Year 3, Optiplex agreed to a special order to produce custom-design generators. The generators are to be completed by June 15, Year 3, with the customer committed to collecting them by July 15, Year 3.**Direct Costs Incurred:**- Cost to complete the design: $3,000- Purchase price for materials and parts: $80,000- Transportation cost for materials and parts: $2,000- Direct labor (10,000 hours at $12/hour): $120,000- Storage cost for finished product (June 15 - June 30): $2,000**Challenges:**Optiplex experienced an unusual waste cost of $5,000 due to inexperience in manufacturing this specific generator design.**Overhead Application:**Optiplex applies variable and fixed overhead to inventory as follows:- Variable overhead: $2 per direct labor hour- Fixed overhead: $9 per direct labor hour (adjusted for Year 3's lower production level)**Required Analysis:**Calculate the inventory value of the custom-design generators to report on Optiplex's June 30, Year 3, balance sheet.This exercise will guide you through calculating overall production costs, including material, labor, overhead, and waste, to determine the accurate inventory valuation for financial reporting.

Notes: Variable Overhead = $2 * 10,000 direct labour hour = $20,000 Fixed Overhead = $9 * 10,000…

Answered: Cost to complete the design of the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Cost to complete the design of the generators $ 3,000 Purchase price for materials and parts 80,000 Transportation cost to get materials and parts to manufacturing facility 2,000 Direct labor (10,000 labor hours at $12 per hour) 120,000 Cost to store finished product (from June 15 to June 30) 2,000