Current Attempt in Progress Khan Products Company uses a job order cost system. For a number of months, there has been an ongoing rift between the sales department and the production department concerning a special-order product, TC-1. TC-1 is a seasonal product that is manufactured in batches of 1,000 units. TC-1 is sold at cost plus a markup of 40% of cost. The sales department is unhappy because fluctuating unit production costs significantly affect selling prices. Sales personnel complain that this has caused excessive customer complaints and the loss of considerable orders for TC-1. The production department maintains that each job order must be fully costed on the basis of the costs incurred during the period in which the goods are produced. Production personnel maintain that the only real solution is for the sales department to increase sales in the slack periods. Andrea Parley, president of the company, asks you as the company accountant to collect quarterly data for the past year on TC-1. From the cost accounting system, you accumulate the following production quantity and cost data. Costs Direct materials Direct labor Manufacturing overhead Total Production in batches Unit cost (per batch) 1 $96,000 36,000 100,000 $232,000 Quarter 2 3 $336,000 $72,000 126,000 27,000 141,860 87,000 $603,860 $186,000 14 3 $58,000 $43,133 $62,000 $336,000 126,000 126,000 $588,000 14 $42,000
Current Attempt in Progress Khan Products Company uses a job order cost system. For a number of months, there has been an ongoing rift between the sales department and the production department concerning a special-order product, TC-1. TC-1 is a seasonal product that is manufactured in batches of 1,000 units. TC-1 is sold at cost plus a markup of 40% of cost. The sales department is unhappy because fluctuating unit production costs significantly affect selling prices. Sales personnel complain that this has caused excessive customer complaints and the loss of considerable orders for TC-1. The production department maintains that each job order must be fully costed on the basis of the costs incurred during the period in which the goods are produced. Production personnel maintain that the only real solution is for the sales department to increase sales in the slack periods. Andrea Parley, president of the company, asks you as the company accountant to collect quarterly data for the past year on TC-1. From the cost accounting system, you accumulate the following production quantity and cost data. Costs Direct materials Direct labor Manufacturing overhead Total Production in batches Unit cost (per batch) 1 $96,000 36,000 100,000 $232,000 Quarter 2 3 $336,000 $72,000 126,000 27,000 141,860 87,000 $603,860 $186,000 14 3 $58,000 $43,133 $62,000 $336,000 126,000 126,000 $588,000 14 $42,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
G.289.
Transcribed Image Text:Current Attempt in Progress
Khan Products Company uses a job order cost system. For a number of months, there has been an ongoing rift between the sales
department and the production department concerning a special-order product, TC-1. TC-1 is a seasonal product that is manufactured
in batches of 1,000 units. TC-1 is sold at cost plus a markup of 40% of cost.
The sales department is unhappy because fluctuating unit production costs significantly affect selling prices. Sales personnel complain
that this has caused excessive customer complaints and the loss of considerable orders for TC-1.
The production department maintains that each job order must be fully costed on the basis of the costs incurred during the period in
which the goods are produced. Production personnel maintain that the only real solution is for the sales department to increase sales
in the slack periods.
Andrea Parley, president of the company, asks you as the company accountant to collect quarterly data for the past year on TC-1. From
the cost accounting system, you accumulate the following production quantity and cost data.
Costs
Direct materials
Direct labor
Manufacturing overhead
Total
Production in batches
Unit cost (per batch)
(c)
Costs
Direct materials
Direct labor
Total
Production in batches
Unit cost (per batch)
1
$96,000
36,000
Manufacturing overhead Applied
Save for Later
100,000
$232,000
4
2
$
Quarter
$
$336,000
126,000
$58,000 $43,133
Restate the quarterly data by applying overhead as a set rate per batch.
14
3
141,860
$603,860 $186,000
$72,000
1
27,000
87,000
3
$62,000
$
$
$336,000
126,000
126,000
$588,000
14
$42,000
2
Quarter
$
$
3
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