PROBLEM 3: Barrett Kitchens produces a variety of items in accordance with special job orders from hospitals, plant cafeterias, and university dormitories. An order for 2,100 cases of mixed vegetables costs $9 per case: direct materials, $4; direct manufacturing labor, $3; and manufacturing overhead allocated, $2. The manufacturing overhead rate includes a provision for normal spoilage. Consider each requirement independently. 1. Assume that a laborer dropped 420 cases. Suppose part of the 420 cases could be sold to a nearby prison for $420 cash. Prepare a journal entry to record this event. Calculate the unit cost of the remaining 1,680 cases. 2. Refer to the original data. Tasters at the company reject 420 of the 2,100 cases. The 420 cases are disposed of for $840. Assume that this rejection rate is considered normal. Prepare a journal entry to record this event, and do the following: a. Calculate the unit cost if the rejection is attributable to exacting specifications of this particular job. b. Calculate the unit cost if the rejection is characteristic of the production process and is not attributable to this job. c. Are unit costs the same in requirements 2a and 2b?

PROBLEM 3: Barrett Kitchens produces a variety of items in accordance with special job orders from hospitals, plant cafeterias, and university dormitories. An order for 2,100 cases of mixed vegetables costs $9 per case: direct materials, $4; direct manufacturing labor, $3; and manufacturing overhead allocated, $2. The manufacturing overhead rate includes a provision for normal spoilage. Consider each requirement independently. 1. Assume that a laborer dropped 420 cases. Suppose part of the 420 cases could be sold to a nearby prison for $420 cash. Prepare a journal entry to record this event. Calculate the unit cost of the remaining 1,680 cases. 2. Refer to the original data. Tasters at the company reject 420 of the 2,100 cases. The 420 cases are disposed of for $840. Assume that this rejection rate is considered normal. Prepare a journal entry to record this event, and do the following: a. Calculate the unit cost if the rejection is attributable to exacting specifications of this particular job. b. Calculate the unit cost if the rejection is characteristic of the production process and is not attributable to this job. c. Are unit costs the same in requirements 2a and 2b?

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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(L. Bamber) Barrett Kitchens produces a variety of items in accordance with special job orders from hospitals, plant cafeterias, and university dormitories. An order for 2,100 cases of mixed vegetables costs $9 per case: direct materials, $4; direct manufacturing labor, $3; and manufacturing overhead allocated, $2. The manufacturing overhead rate includes a provision for normal spoilage. Consider each requirement independently. Q. Refer to the original data. Tasters at the company reject 420 of the 2,100 cases. The 420 cases are disposed of for $840. Assume that this rejection rate is considered normal. Prepare a journal entry to record this event, and do the following: a.Calculate the unit cost if the rejection is characteristic of the production process and is not attributable to this specific job.
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Highland Company produces a lightweight backpack that is popular with college students. Standard variable costs relating to a single backpack are given below: Standard Quantity or Hours Standard Price or Rate Standard Cost Direct materials ? $ 4.00 per yard $ ? Direct labor ? ? ? Variable manufacturing overhead ? $ 2 per direct labor-hour ? Total standard cost per unit $ ? Overhead is applied to production on the basis of direct labor-hours. During March, 700 backpacks were manufactured and sold. Selected information relating to the month’s production is given below: Materials Used Direct Labor Variable Manufacturing Overhead Total standard cost allowed* $ 11,200 $ 10,500 $ 2,100 Actual costs incurred $ 8,925 ? $ 4,032 Materials price variance ? Materials quantity variance $ 700 U Labor rate variance ? Labor efficiency variance ? Variable overhead rate variance ? Variable overhead efficiency variance ? *For…
Paper Roses Boutique has been approached by the community college to make special polo shirts for the faculty and staff. The college is willing to buy 4,000 polos with its own design for P6.00 each. The company normally sells its shirts for P12.00 each. The company has enough excess capacity to make this order. A breakdown of the costs is as follows: Direct materials P2.00 Direct labor 0.50 Variable factory overhead 1.50 Fixed factory overhead _2.50 Total cost per unit P6.50 Should Paper Roses Boutique accept the special order made by the college? Show computations, but a formal differential analysis report is not required.
Gibson Company produces commercial gardening equipment. Since production is highly automated, the company allocates its overhead costs to product lines using activity-based costing. The costs and cost drivers associated with the four overhead activity cost pools follow: Cost Cost driver Unit Level $50,600 Req A and B 2,300 labor hours. Production of 890 sets of cutting shears, one of the company's 20 products, took 210 labor hours and 9 setups and consumed 10 percent of the product-sustaining activities. Complete this question by entering your answers in the tabs below. Req C a. Allocated cost b. Allocated cost Activities Batch Level $ 21,160 46 setups Required a. Had the company used labor hours as a companywide allocation base, how much overhead would it have allocated to the cutting shears? b. How much overhead is allocated to the cutting shears using activity-based costing? c. Compute the overhead cost per unit for cutting shears first using activity-based costing and then using…
Highland Company produces a lightweight backpack that is popular with college students. Standard variable costs relating to a single backpack are given below: Standard Quantity or Hours Standard Price or Rate Standard Cost Direct materials ? $ 4.00 per yard $ ? Direct labor ? ? ? Variable manufacturing overhead ? $ 2 per direct labor-hour ? Total standard cost per unit $ ? Overhead is applied to production on the basis of direct labor-hours. During March, 700 backpacks were manufactured and sold. Selected information relating to the month’s production is given below: Materials Used Direct Labor Variable Manufacturing Overhead Total standard cost allowed* $ 11,200 $ 10,500 $ 2,100 Actual costs incurred $ 8,925 ? $ 4,032 Materials price variance ? Materials quantity variance $ 700 U Labor rate variance ? Labor efficiency variance ? Variable overhead rate variance ? Variable overhead efficiency variance ? *For…
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A Midwest producer of specialty farming equipment, Agriboon, has three products that the company needs costing information about. The following information is available for each product. XY263 GO987 TR345 Direct material cost per unit $2.00 $8.00 $10.00 Direct labor cost per hour $15.00 $16.75 $18.00 Agriboon presently applies overhead using a predetermined rate based on direct labor hours. Estimated Direct Labor hours for the year are 132,026. The product leader for GO987 has suggested that Agriboon switch to activity-based costing and identified the following activities, cost drivers, estimated costs, and estimated cost driver units for the year: Activity Recommended Cost Driver Estimated Cost Estimated Cost Driver Units Materials Handling Requisition Request $38,912 1,216 Request Machine Operations Machine Hours $142,500 12,000 Hours Safety Compliance Compliance Test $125,000 1,100 Test Total OH…
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