Answered: d. For your recommended costing system,…

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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Please anwer d. 1. 2. 3.

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.
Complete this question by entering your answers in the tabs below.
Reg A
Req B
Req 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
Units produced
Unit cost
< Req C
Req D2 >

Transcribed Image Text:Bouwens Corporation manufactures a solvent used in alrplane malntenance 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 millitary is chemically identical to that sold to the alrlines, the company produces solvent for the two customer types in different buildings at the plant. The solvent sold to the military is manufactured In bullding 155 (B-155) and Is labeled M-Solv. The solvent sold to the commercial alrlınes is manufactured in bullding 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 amenitles. Workers at Bouwens, who all have roughly equal skills, bid on their job locations (the bulldings they will work In) and are assigned based on bids and seniority. As workers galn senlority, they also receive higher pay. The solvent sold to the two customers Is essentlally identical, but the millitary requires Bouwens to use a base chemical with a brand name, MX. The solvent for the commerclal alrlines is called CX. MX Is required for milltary applicatilons because It is sold by vendors on a preferred vendor list. The company sells solvent for the market price to the alrlines. 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 welghted-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 millitary solvent, and Jill, the product manager for the commerclal 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 buldings for each month, as the batch. JIll: Jack, the fact is that the milltary 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 C-Solv (B-155) (B-159) Total Units started 12,400 10,400 $24,000 $ 34,000 $ 58, 00e 115,000 2,000 Materials cost Conversion cost 35,000 150, 000 Total $59,000 $149,000 $208, 00e

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