Ortega Industries Inc. manufactures in separate processes furniture for homes

ACC 560 Week 2 Assignment

P3-2A Ortega Industries Inc. manufactures in separate processes furniture for homes. In each process, materials are entered at the beginning, and conversion costs are incurred uniformly. Production and cost data for the first process in making two products in two different manufacturing plants are as follows.
Cutting Department
Plant 1 Plant 2
Production Data-July T12-Tables C10-Chairs
Work in process units, July 1 -0- -0-
Units started into production 20,000 16,000
Work in process units, July 31 3,000 500
Work in process percent complete 60 80

Cost Data-July
Work in process, July 1 $ -0- $ -0-
Materials 380,000 288,000
Labor 234,400 125,900
Overhead 104,000 96,700
Total $718,400 $510,600

a) For each plant:
1. Compute the physical units of production
2. Compute equivalent units of production for materials and for conversion costs.
3. Determine the unit costs of production.
4. Show the assignment of costs to units transferred out and in process.

b) Prepare the production cost report for Plant 1 for July 2008

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Stellar Stairs Co. of Poway designs and builds factory-made premium wooden stairs for homes

ACC 560 Week 3 Assignment

P4-3A Stellar Stairs Co. of Poway designs and builds factory-made premium wooden stairs for homes. The manufactured stair components (spindles, risers, hangers, hand rails) permit installation of stairs of varying lengths and widths. All are of white oak wood. Its budgeted manufacturing overhead costs for the year 2009 are as follows.

Overhead Cost Pools Amount
Purchasing $ 57,000
Handling materials 82,000
Production (cutting, milling, finishing) 210,000
Setting up machines 85,000
Inspecting 90,000
Inventory control (raw materials and finished goods) 126,000
Utilities 180,000
Total budget overhead costs $830,000

For the last 4 years, Stellar Stairs Co. has been charging overhead to products on the basis of machine hours. For the year 2009, 100,000 machine hours are budgeted.

Heather Fujar, owner-manager of Stellar Stairs Co., recently directed her accountant, Lindsay Baker, to implement the activity-based costing system that she has repeatedly proposed. At Heather Fujar's request, Lindsay and the production foreman identify the following cost drivers and their usage for the previously budgeted overhead cost pools.

Activity Cost Pools Cost Drivers Expected
Use of Cost Drivers
Purchasing Number of orders 600
Handling materials Number of moves 8,000
Production (cutting, milling, finishing) Direct labor hours 100,000
Setting up machines Number of setups 1,250
Inspecting Number of inspections 6,000
Inventory control (raw materials and finished goods) Number of components 168,000
Utilities Square feet occupied 90,000

Jason Dion, sales manager, has received an order for 280 stairs from Community Builders, Inc., a large housing development contractor. At Jason's request, Lindsay prepares cost estimates for producing components for 280 stairs so Jason can submit a contract price per stair to Community Builders. She accumulates the following data for the production of 280 stairways.

Direct materials $103,600
Direct labor $112,000
Machine hours 14,500
Direct labor hours 5,000
Number of purchase orders 60
Number of material moves 800
Number of machine setups 100
Number of inspections 450
Number of components 16,000
Number of square feet occupied 8,000

Instructions
a) Compute the predetermined overhead rate using traditional costing with machine hours as the basis.
b) What is the manufacturing cost per stairway under traditional costing?
c) What is the manufacturing cost per stairway under the proposed activity-based costing? (Prepare all of the necessary schedules.)
d) Which of the two costing systems is preferable in pricing decisions and why?

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T. Allen Home Improvement Company installs replacement siding, windows, and louvered glass doors for single family homes

P9-2 (Lower-of-Cost-or-Market) T. Allen Home Improvement Company installs replacement siding, windows, and louvered glass doors for single family homes and condominium complexes in northern New Jersey and southern New York. The company is in the process of preparing its annual financial statements for the fiscal year ended May 31, 2007, and Tim Taylor, controller for T. Allen, has gathered the following data concerning inventory. At May 31, 2007, the balance in T. Allen’s Raw Material Inventory account was $408,000, and the Allowance to Reduce Inventory to Market had a credit balance of $29,500. Taylor summarized the relevant inventory cost and market data at May 31, 2007, in the schedule below. Taylor assigned Patricia Richardson, an intern from a local college, the task of calculating the amount that should appear on T. Allen’s May 31, 2007, financial statements for inventory under the lower-of-cost or-market rule as applied to each item in inventory. Richardson expressed concern over departing from the cost principle.

Replacement Sales Net Realizable Normal
Cost Cost Price Value Profit
Aluminum siding $ 70,000 $ 62,500 $ 64,000 $ 56,000 $ 5,100
Cedar shake siding 86,000 79,400 94,000 84,800 7,400
Louvered glass doors 112,000 124,000 186,400 168,300 18,500
Thermal windows 140,000 122,000 154,800 140,000 15,400
Total $408,000 $387,900 $499,200 $449,100 $46,400

Instructions
(a) (1) Determine the proper balance in the Allowance to Reduce Inventory to Market at May 31, 2007.
(2) For the fiscal year ended May 31, 2007, determine the amount of the gain or loss that would be recorded due to the change in the Allowance to Reduce Inventory to Market.
(b) Explain the rationale for the use of the lower-of-cost-or-market rule as it applies to inventories


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Ortega Industries Inc. manufactures in separate processes furniture for homes

Problem 3-2A (P3-2A) Ortega Industries Inc. manufactures in separate processes furniture for homes. In each process, materials are entered at the beginning, and conversion costs are incurred uniformly. Production and cost data for the first process in making two products in two different manufacturing plants are as follows.

Cutting Department
Plant 1 Plant 2
Production Data—July T12-Tables C10-Chairs
Work in process units, July 1 –0– –0–
Units started into production 20,000 16,000
Work in process units, July 31 3,000 500
Work in process percent complete 60 80
Cost Data—July
Work in process, July 1 $ –0– $ –0–
Materials 380,000 288,000
Labor 234,400 125,900
Overhead 104,000 96,700
Total $718,400 $510,600

Hint:
Complete four steps necessary to prepare a production cost report.

Instructions
(a) For each plant:

1. Compute the physical units of production.
2. Compute equivalent units of production for materials and for conversion costs.
3. Determine the unit costs of production.
4. Show the assignment of costs to units transferred out and in process.

Check:
(a) (1) T12: Transferred out 17,000 units; WIP 3,000 units
(2) T12: Materials 20,000 e.u.; CC 18,800 e.u.
(3) T12: Materials $19; CC $18
(4) T12: Transferred out $629,000; WIP $89,400

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