Problem 6-71 (Algo) Operations Costing and Two-Stage Systems (LO 6-3, 4) Larned Recreational builds two models of dune buggies: Sport and Custom. Both models require the same assembly and finishing process and are assembled in the same factory. They differ in the quality and detail of the materials. The following data reflect expected operations for the upcoming year. Number of units Direct materials cost per unit Conversion costs: Direct labor Overhead Total Sport 3, 200 $ 400 Custom 1,800 $ 1,100 Total 5,000 $ 1,848,000 2,608,000 $ 4,456,000 Required: a. Larned Recreation uses operations costing and assigns conversion costs based on the number of units assembled. Compute the cost per unit of the Sport and Custom models for the upcoming year. b. The financial team at Larned suggests that a two-stage system be used to compute the product cost of the two models. Their recommendation is to assign direct labor cost based on the number of units and overhead cost based on direct materials cost. Compute the cost per unit of the Sport and Custom models for the upcoming year using the team's recommendation.
Problem 6-71 (Algo) Operations Costing and Two-Stage Systems (LO 6-3, 4) Larned Recreational builds two models of dune buggies: Sport and Custom. Both models require the same assembly and finishing process and are assembled in the same factory. They differ in the quality and detail of the materials. The following data reflect expected operations for the upcoming year. Number of units Direct materials cost per unit Conversion costs: Direct labor Overhead Total Sport 3, 200 $ 400 Custom 1,800 $ 1,100 Total 5,000 $ 1,848,000 2,608,000 $ 4,456,000 Required: a. Larned Recreation uses operations costing and assigns conversion costs based on the number of units assembled. Compute the cost per unit of the Sport and Custom models for the upcoming year. b. The financial team at Larned suggests that a two-stage system be used to compute the product cost of the two models. Their recommendation is to assign direct labor cost based on the number of units and overhead cost based on direct materials cost. Compute the cost per unit of the Sport and Custom models for the upcoming year using the team's recommendation.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Problem 6-71 (Algo) Operations Costing and Two-Stage Systems (LO 6-3, 4)
Larned Recreational builds two models of dune buggies: Sport and Custom. Both models require the same assembly and finishing
process and are assembled in the same factory. They differ in the quality and detail of the materials. The following data reflect
expected operations for the upcoming year.
Number of units
Direct materials cost per unit
Conversion costs:
Direct labor
Overhead
Total
Sport
3, 200
$ 400
Custom
1,800
$ 1,100
< Prev
Total
$ 1,848,000
2,608,000
$ 4,456,000
Required:
a. Larned Recreation uses operations costing and assigns conversion costs based on the number of units assembled. Compute the
cost per unit of the Sport and Custom models for the upcoming year.
b. The financial team at Larned suggests that a two-stage system be used to compute the product cost of the two models. Their
recommendation is to assign direct labor cost based on the number of units and overhead cost based on direct materials cost.
Compute the cost per unit of the Sport and Custom models for the upcoming year using the team's recommendation.
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