Study the Appendix to this chapter.

Sonor Instruments Co. uses three operations in sequence to make two models of its depth finders for sport fishing. Consider the following:

1. Operation 2 is highly automated. Product costs depend on a budgeted application rate for conversion costs based on machine hours. The budgeted costs for 2006 were $220,000 direct labour and $580,000 factory overhead. Budgeted machine hours were 20,000. Each depth finder requires 6 minutes of time in Operation 2. Compute the costs of processing 1,000 depth finders in Operation 2.
2. Compute the total manufacturing costs of 1,000 depth finders and the cost per standard depth finder and per deluxe depth finder.
3. Suppose that at the end of the year, 500 standard depth finders were in process through Operation 1 only and 600 deluxe depth finders were in process through Operation 2 only. Compute the cost of the ending work-in-process inventory. Assume that no direct materials are applied in Operation 2, but that $10,000 of the $100,000 directmaterials cost of the deluxe depth findérs are applied to each 1,000 depth finders processed in Operation 3.

Transcribed Image Text:

Direct materials (actual costs applied) Conversion costs (predetermined costs applied on the basis of machine-hours used) PRODUCTION ORDERS FOR 1,000 STANDARD DEPTH FINDERS $57,000 FOR 1,000 DELUXE DEPTH FINDERS $100,000 19,000 19,000 ? Operation 1 Operation 2 ? Operation 3 Total manufacturing costs applied $ 7 15,000 $ ?