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1. Chen Company manufactures basketballs. Materials are added at the beginning of the production process and conversion costs are incurred uniformly. Production and cost data

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1. Chen Company manufactures basketballs. Materials are added at the beginning of the production process and conversion costs are incurred uniformly. Production and cost data for the month of July 2010 are as follows. Basketballs Units Percent Complete Production Data Work in process units, July 1 500 60% Units started into production 1.000 Work in process units, July 31 600 30% Cost Data Work in process, July 1 Materials $750 Conversion costs 600 $1,350 Direct materials 2.400 Direct labor 1.580 Manufacturing overhead 1,060 Instructions (a) Calculate the following. (1) The equivalent units of production for materials and conversion. (2) The unit costs of production for materials and conversion costs. (3) The assignment of costs to units transferred out and in process at the end of the accounting period. (b) Prepare a production cost report for the month of July for the basketballs. 2. Colt Industries had sales in 2010 of S6,400,000 and gross profit of $1,100,000. Management is considering two alternative budget plans to increase its gross profit in 2011. Plan A would increase the selling price per unit from $8.00 to $8.40. Sales volume would decrease by 5% from its 2010 level. Plan B would decrease the selling price per unit by S0.50. The marketing department expects that the sales volume would increase by 150,000 units. At the end of 2010, Colt has 40,000 units of inventory on hand. If Plan A is accepted, the 2011 ending inventory should be equal to 5% of the 2011 sales. if Plan B is accepted, the ending inventory should be equal to 50,000 units. Each unit produced will cost $1.80 in direct labor, $2.00 in direct materials, and $1.20 in variable overhead. The fixed overhead for 2011 should be $1.895,000. Instructions (a) Prepare a sales budget for 2011 under each plan (b) Prepare a production budget for 2011 under each plan. (e) Compute the production cost per unit under each plan. Why is the cost per unit different for each of the two plans? (Round to two decimals.) (d) Which plan should be accepted

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