Hansen Industries started operations three years ago and is gaining a reputation for the manufacturing of quality paint. The ac- counting system is evolving and has not been fully formalized. A chief accoun- tant, Deborah Turner, has been hired to bring order to the paper shuffling. In the process, Turner has gathered data to prepare cost of production reports for Activ- ity Center A for the first three months of the current fiscal year (April, May, and June). This information is as follows:

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April May June Gallons: Beginning inventory. 10,000 ? Started in production. 80,000 65,000 70,000 Completed 70,000 60,000 7 Ending inventory ? ? 20,000 Stage of completion: Beginning inventory Ending inventory... 60% 30% 70% 30% 70% 40% Cost data: Beginning inventory: Materials Conversion costs Current period: Materials Conversion costs $ 10,000 ? 20,000 ? ? $ 80,000 $ 66,000 $ 70,000 170,000 142,000 156,000 Materials are added at the beginning of Activity Center A. Conversion costs flow uniformly throughout the process. Required: 1. Compute the physical flows of product for each of the three months. 2. Prepare a cost of production report for each of the three months. Round unit costs to four decimal places and total dollars to the nearest dollar. 3. Analyze the cost of production reports for each month, and comment on production stability and unit costs for materials and conversion costs.