Questions 32 through 35 are based on the following information.

Gregg Industries manufactures molded chairs. The three models of molded chairs, which are all variations of the same design, are Standard (can be stacked), Deluxe (with arms), and Executive (with arms and padding). The company uses batch manufacturing and has an operation costing system.

Gregg has an extrusion operation and subsequent operations to form, trim, and finish the chairs. Plastic sheets are produced by the extrusion operation, some of which are sold directly to other manufacturers. During the forming operation, the remaining plastic sheets are molded into chair seats and the legs are added; the standard model is sold after this operation. During the trim operation, the arms are added to the deluxe and executive models and the chair edges are smoothed. Only the executive model enters the finish operation where the padding is added. All of the units produced are subject to the same steps within each operation, and no units are in process at the end of the period. The units of production and direct materials cost were as follows:

 

	Units Produced	Extrusion	Form	Trim	Finish
Plastic sheets	5,000	$60,000
Standard model	6,000	72,000	$24,000
Deluxe model	3,000	36,000	12,000	$9,000
Executive model	2,000	24,000	8,000	6,000	$12,000
	16,000 Units	$192,000	$44,000	$15,000	$12,000

Manufacturing costs applied during the month were:

	Extrusion Operation	Form Operation	Trim Operation	Finish Operation
Direct labor	$152,000	$60,000	$30,000	$18,000
Overhead	240,000	72,000	39,000	24,000

 

Problem 32.     Find the unit cost of a standard model.

Discussion:       A standard model passes through the extrusion and form operations. Thus, its unit cost includes the materials and conversion costs for both operations.

 

The unit materials and conversion costs for the extrusion operation are the following:

Materials:                     ($192,000 / 16,000 units)                     =          $12.00

Conversion Costs:        ($152,000 +$ 240,000) / 16,000 units =          $24.50

The unit materials and conversion costs for the form operation are the following:

Materials:                     [$44,000 / (16,000 - 5,000 units)]        =          $4.00

Conversion Costs:        [($60,000 + $72,000) / (16,000 - 5,000 u)] = $12.00

Accordingly, the unit cost of a standard model is the following:

($12.00 + $24.50 + $4.00 + $12.00) Add the Materials and Conversion Costs of both processes.

$52.50

 

Problem 33.     Find the unit cost of the deluxe model.

Discussion:       A deluxe model passes through the extrusion, form, and trim operations, so its unit cost equals that of the standard model plus the unit costs incurred in the trim operation.

The unit materials and conversion costs for the trim operations are the following:

Materials:                      [$15,000 / (16,000 - 11,000) units] = $3.00

Conversion Costs:         [($30,000 + $39,000) / (16,000 - 11,00) units] = $13.80

Hence, the unit cost of a deluxe model is $52.50 + $3.00 + $13.80 =

$69.30

 

Problem 34.     Find the total product cost of the executive model.

Discussion:       An executive model passes through all four operations. Thus, its unit cost equals that of the deluxe model plus the unit costs incurred in the finish operation. The unit cost of the deluxe model is $69.30.

The unit materials and conversion costs for the finish operation are the following:

Materials:                      [$12,000 / (16,000 - 14,000) units] = $6.00

Conversion Costs:         [($18,000 + $24,000) / (16,000 - 14,000)] units = $21.00

Consequently, the unit costs of the executive model is $69.30 + $6 + 21 = $96.30 (then multiply by # of units)

The total product cost is ($96.30 x 2,000 units) =

$192,600

 

Problem 35.     Assume that 1,000 units of the deluxe model remained in work-in-process at the end of the period and that these units were 100% complete as to materials and 60% complete as to trim operation conversion. What is the balance of work-in-process?

Discussion:       Given that 5,000 units (16,000 - 11,000) entered the trim operation, they consisted of 2,000 deluxe units and 2,000 executive units that were complete as to materials trim operation conversion and 1,000 deluxe units that were complete as to materials and 60% complete as to trim operation conversion. Accordingly, the equivalent units of production for materials in the trim operation equaled...

5,000 (5,000 physical units x 100%)

However, the Equal Units of Production (EUP) for trim operation conversion equaled...

   2,000 x 100%            Deluxe Units

   2,000 x 100%            Executive Units

+ 1,000 x 60%             Trim Operation

4,600 Units

Because total conversion cost for the trim operation was $69,000, the conversion cost per equivalent unit was ($69,000 / 4,600) = $15

The total trim operation conversion cost in work-in-process was...

(1,000 physical units x 60%)     =          $9,000

(1,000 units x $15 x 60%)         =          $9,000

Moreover, the work-in-process is complete as to all materials costs for the first three operations and the conversion costs for the first two operations.

Extrusion operations:

Unit Materials:              ($192,000 / 16,000 units)                     =          $12.00

Conversion Costs:         ($392,000 / 16,000 units)                     =          $24.50

Form operations:

Units Materials:             [($44,000 / (16,000 - 5,000) units]       =          $4.00

Conversion Costs:         [$132,000 / (16,000 - 5,000) units]      =          $12.00

The total cost of work-in-process is therefore...

$9,000 Total WIP for Trim Process

+ [1,000 units x ($12.00 + $4.00 + $3.00 + $24.50 + $12.00)]

$64,500

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