Problem Set 2 Caricolor Limited operates a paint manufacturing plant, housing two distinct departments: the mixing department and the quality control department. The paint undergoes sequential processing in both of these departments. The company's process-costing system is structured around two primary cost categories: direct materials and conversion costs. Direct materials are introduced at the initial stages of the process, while conversion costs are gradually incurred throughout the process. After completion of the mixing department's tasks on the paint, the product is promptly forwarded to the quality control department. Caricolor employs the weighted-average method for process costing to calculate its manufacturing costs. Data for the mixing department for October 2020 are as follows: Physical Units (Gallons of Paint) Direct Materials Conversion Costs Work in process, October 1* 16,000 Started during October 2020 44,000 $2,800,000 $ 901,400 Completed during October 2020 51,000 Work in process, October 31' 9,000 Total costs added during October 2020 $9,400,000 $5,111,000 x Degree of completion: direct materials, 100%; conversion costs, 60%. y Degree of completion: direct materials, 100%; conversion costs, 70%.

Problem Set 2 Caricolor Limited operates a paint manufacturing plant, housing two distinct departments: the mixing department and the quality control department. The paint undergoes sequential processing in both of these departments. The company's process-costing system is structured around two primary cost categories: direct materials and conversion costs. Direct materials are introduced at the initial stages of the process, while conversion costs are gradually incurred throughout the process. After completion of the mixing department's tasks on the paint, the product is promptly forwarded to the quality control department. Caricolor employs the weighted-average method for process costing to calculate its manufacturing costs. Data for the mixing department for October 2020 are as follows: Physical Units (Gallons of Paint) Direct Materials Conversion Costs Work in process, October 1* 16,000 Started during October 2020 44,000 $2,800,000 $ 901,400 Completed during October 2020 51,000 Work in process, October 31' 9,000 Total costs added during October 2020 $9,400,000 $5,111,000 x Degree of completion: direct materials, 100%; conversion costs, 60%. y Degree of completion: direct materials, 100%; conversion costs, 70%.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 36P: Reducir, Inc., produces two different types of hydraulic cylinders. Reducir produces a major...

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Tom Young, vice president of Dunn Company (a producer of plastic products), has been supervising the implementation of an activity-based cost management system. One of Toms objectives is to improve process efficiency by improving the activities that define the processes. To illustrate the potential of the new system to the president, Tom has decided to focus on two processes: production and customer service. Within each process, one activity will be selected for improvement: molding for production and sustaining engineering for customer service. (Sustaining engineers are responsible for redesigning products based on customer needs and feedback.) Value-added standards are identified for each activity. For molding, the value-added standard calls for nine pounds per mold. (Although the products differ in shape and function, their size, as measured by weight, is uniform.) The value-added standard is based on the elimination of all waste due to defective molds (materials is by far the major cost for the molding activity). The standard price for molding is 15 per pound. For sustaining engineering, the standard is 60 percent of current practical activity capacity. This standard is based on the fact that about 40 percent of the complaints have to do with design features that could have been avoided or anticipated by the company. Current practical capacity (the first year) is defined by the following requirements: 18,000 engineering hours for each product group that has been on the market or in development for five years or less, and 7,200 hours per product group of more than five years. Four product groups have less than five years experience, and 10 product groups have more. There are 72 engineers, each paid a salary of 70,000. Each engineer can provide 2,000 hours of service per year. There are no other significant costs for the engineering activity. For the first year, actual pounds used for molding were 25 percent above the level called for by the value-added standard; engineering usage was 138,000 hours. There were 240,000 units of output produced. Tom and the operational managers have selected some improvement measures that promise to reduce non-value-added activity usage by 30 percent in the second year. Selected actual results achieved for the second year are as follows: The actual prices paid per pound and per engineering hour are identical to the standard or budgeted prices. Required: 1. For the first year, calculate the non-value-added usage and costs for molding and sustaining engineering. Also, calculate the cost of unused capacity for the engineering activity. 2. Using the targeted reduction, establish kaizen standards for molding and engineering (for the second year). 3. Using the kaizen standards prepared in Requirement 2, compute the second-year usage variances, expressed in both physical and financial measures, for molding and engineering. (For engineering, explain why it is necessary to compare actual resource usage with the kaizen standard.) Comment on the companys ability to achieve its targeted reductions. In particular, discuss what measures the company must take to capture any realized reductions in resource usage.
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Caricolor Limited operates a paint manufacturing plant, housing two distinct departments: themixing department and the quality control department. The paint undergoes sequentialprocessing in both of these departments.The company's process-costing system is structured around two primary cost categories:direct materials and conversion costs. Direct materials are introduced at the initial stages ofthe process, while conversion costs are gradually incurred throughout the process. Aftercompletion of the mixing department's tasks on the paint, the product is promptly forwardedto the quality control department. Caricolor employs the weighted-average method forprocess costing to calculate its manufacturing costs.Data for the mixing department for October 2020 are as follows: Required: 1. Compute equivalent units in the mixing department, for each cost category? 2. Summarize total mixing department costs for October 2020 for each cost category, and calculate the cost per equivalent unit?
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FIFO Method, Two-Department Analysis Muskoge Company uses a process-costing system. The company manufactures a product that is processed in two departments: Molding and Assembly. In the Molding Department, direct materials are added at the beginning of the process; in the Assembly Department, additional direct materials are added at the end of the process. In both departments, conversion costs are incurred uniformly throughout the process. As work is completed, it is transferred out. The following table summarizes the production activity and costs for February: Molding Assembly Beginning inventories: Physical units 10,000 8,000 Costs: Transferred in — $45,300 Direct materials $22,000 — Conversion costs $13,800 $16,900 Current production: Units started 25,000 ? Units transferred out 30,000 35,000 Costs: Transferred in — ? Direct materials…
FIFO Method, Two-Department Analysis Muskoge Company uses a process-costing system. The company manufactures a product that is processed in two departments: Molding and Assembly. In the Molding Department, direct materials are added at the beginning of the process; in the Assembly Department, additional direct materials are added at the end of the process. In both departments, conversion costs are incurred uniformly throughout the process. As work is completed, it is transferred out. The following table summarizes the production activity and costs for February: Molding Assembly Beginning inventories:   Physical units 10,000   8,000     Costs:     Transferred in —   $45,300       Direct materials $22,000   —       Conversion costs $13,800   $16,900   Current production:   Units started 25,000   ?     Units transferred out 30,000   35,000     Costs:     Transferred in —   ?       Direct materials…
FIFO Method, Two-Department Analysis Muskoge Company uses a process-costing system. The company manufactures a product that is processed in two departments: Molding and Assembly. In the Molding Department, direct materials are added at the beginning of the process; in the Assembly Department, additional direct materials are added at the end of the process. In both departments, conversion costs are incurred uniformly throughout the process. As work is completed, it is transferred out. The following table summarizes the production activity and costs for February: Molding Assembly Beginning inventories:   Physical units 10,000   8,000     Costs:     Transferred in —   $45,300       Direct materials $22,000   —       Conversion costs $13,800   $16,700   Current production:   Units started 25,000   ?     Units transferred out 30,000   35,000     Costs:     Transferred in —   ?       Direct materials…
FIFO Method, Two-Department Analysis Muskoge Company uses a process-costing system. The company manufactures a product that is processed in two departments: Molding and Assembly. In the Molding Department, direct materials are added at the beginning of the process; in the Assembly Department, additional direct materials are added at the end of the process. In both departments, conversion costs are incurred uniformly throughout the process. As work is completed, it is transferred out. The following table summarizes the production activity and costs for February: Molding Assembly Beginning inventories:   Physical units 10,000   8,000     Costs:     Transferred in —   $45,300       Direct materials $22,000   —       Conversion costs $13,800   $16,900   Current production:   Units started 25,000   ?     Units transferred out 30,000   35,000     Costs:     Transferred in —   ?       Direct materials…