Refer to the information in Exercise 21.18 in answering the following requirements; there is no connection between the situations. 

Data From Exercise 21.18

Salamanca SA manufactures filing cabinets in two operations: machining and finishing. Additional information is as follows.

Each cabinet sells for €72 and has direct materials costs of €32 incurred at the start of the machining operation. Salamanca has no other variable costs. Salamanca can sell whatever output it produces. The following requirements refer only to the preceding data; there is no connection between the situations.

Required 

1. Salamanca produces 2000 defective units at the machining operation. What is the cost to Salamanca of the defective items produced? Explain your answer briefly. 

2. Salamanca produces 2000 defective units at the finishing operation. What is the cost to Salamanca of the defective items produced? Explain your answer briefly.

Transcribed Image Text:

Machining Finishing 80 000 units 80 000 units Annual capacity Annual production Fixed operating costs (excluding direct materials) Fixed operating costs per unit produced (€640 000 + 80 000; €400 000 + 80 000) 100 000 units 80 000 units €640 000 €400 000 €8 per unit €5 per unit