Figure 620 Outrageous Cups Corp manufactures cups The compan

Figure 6-20

Outrageous Cups Corp. manufactures cups. The company\'s manufacturing operations and costs applied to products for April were:

Molding          Heat-treat        Finishing

Direct labor                 $25,000           $12,500           $ 7,500

Factory overhead        30,000             17,500             12,600

Total                            $55,000           $30,000           $20,100

Three types of cups were produced in April. The quantities and direct materials costs were:

Type                Quantity          Direct Materials

Casts               5,000               $15,000

Cups                7,000               22,470

Mugs               8,000               32,500

Casts are produced in the Molding Department. Cups pass through the Molding and Finishing Departments. Mugs pass through all three departments. An operations costing system is used.

38. Refer to Figure 6-20. What is Outrageous Cups\' conversion cost per unit for the heat-treat operation, rounded to two decimal places?

a. $1.50

b. $2.00

c. $2.50

d. $3.75

39. Refer to Figure 6-20. What is Outrageous Cups\' total cost for Casts in April?

a. $13,750

b. $26,275

c. $28,750

d. $70,000

40. Refer to Figure 6-20. What is Outrageous Cups\' total cost per unit for Cups in April?

a. $4.09

b. $7.30

c. $7.84

d. $11.05

Solution

1. Outrageous Cups\' conversion cost per unit for the heat-treat operation.

As the Mugs is the only product which passes through heat-treat operation, we will consider only mugs to calculate conversion cost of heat trea

Outrageous Cups\' conversion cost per unit for the heat-treat operation = Total Conversion cost / No. of Mugs

Outrageous Cups\' conversion cost per unit for the heat-treat operation = $30000 / 8000 = $3.75 per unit Option D

2. Outrageous Cups\' total cost for Casts in April

As all the three products passes through molding department we will consider all the three to calculate conversion cost in molding department

Conversion cost in Molding department = Total Conversion cost / Total Products = $55000 / 20000 = $2.75

Total Cost of Casts = Direct Material + Conversion cost per unit * No. of Units

Total Cost of Casts = $15000 + $2.75 * 5000

Total Cost of Casts = $28750 Option C

3. Outrageous Cups\' total cost per unit for Cups in April

Only Cups passes through Molding and finishing department

conversion cost per unit in Molding department = $2.75

conversion cost per unit in Finishing department = $20100 / 15000 = $1.34

Direct Materail per unit =$22470 / 7000 = $3.21

Total Cost per unit = $2.75 + $1.34 + $3.21 = $7.30 Option B