Using scrap materials accounting information FLC Corporation manufactures wooden picnic tables which are sold to department stores and garden stores. Recently the company accepted an offer to make 1,000 picnic tables for the state park system of a midwestern state. The purchase price for the state park picnic table contract is prime cost plus 40 percent. The prime cost for producing the picnic tables is $46,000 for direct materials and $24,000 of direct labor.

A certain amount of scrap lumber is produced in the manufacture of picnic tables. The scrap is sold to a charcoal manufacturing company. The scrap generated by the production of the state parks picnic tables was sold for $3,000. Typically FLC Corporation records scrap as a miscella- neous revenue.

Transcribed Image Text:

REQUIRED a. Record the sale of the scrap following FLC Corporation's normal procedure. b. Record the sale of the scrap so that the individual job receives the benefit of the scrap sale. c. If FLC follows their normal procedure, what is the per unit price they will receive for the picnic tables? d. If FLC changed it policy to record the sale of scrap as a reduction in the cost of the individual job, what would be the per unit cost of the picnic tables? e. Compute the percentage decrease in the sales price of the picnic tables if the sale of scrap is assigned to the job. f. Compute the difference in the total profit that would result from using the two different methods of accounting for the scrap.