Accumulating and Assigning Costs to Products

1. Calla Manufacturing Company has 40 machines in its factory. The machines run for two shifts each day. Allowing for machine maintenance and break time for machine operators, each machine can be used for production for an average of 6.5 hours per shift. Assuming the factory operates for an average of 22 days per month, what is Calla's practical capacity number of machine hours per month?

2. The following costs pertain to job 903 at Pat's Auto Shop:

Costs	Quantity	Price
Direct materials:
Engine Oil	14 ounces	$5 per ounce
Lubricant	22 ounces	$8 per ounce
Direct labor	3 hours	$15 per hour
Overhead costs (based on direct labor hours)		$8 per hour

Determine the total cost for job 903.

3. Northern Wood Products has two production departments: cutting and assembly. The company has been using a plantwide cost driver rate computed by dividing plantwide overhead costs by total plantwide direct labor hours. The estimates for overhead costs and practical capacity quantities of cost drivers for the current year follow:

	Cutting	Assembly	Total
Manufacturing Overhead	$125,000	$35,000	$160,000
Direct labor hours	3,000	5,000	8,000
Machine hours	5,000	2,000	7,000

Required

1. Compute the plantwide cost driver rate.
2. Determine departmental cost driver rates based on direct labor hours for assembly and ma-chine hours for cutting.
3. Provide reasons why Northern Wood might use the method in part (a) or the one in part (b).

4. Cambridge Company manufactures plastic bottles that it sells to organizations that manufacture bottled water. During the most recent month, there was no opening inventory. During the month, 25 million bottles were entered into production and 24 million were completed. The units in ending inventory were 100% complete with respect to materials costs and 60% complete with respect to conversion costs. During the month, materials costs were $500,000 and conversion costs were $246,000.

Required

1. What was the number of equivalent units work done for conversion costs this month?
2. What was the cost per equivalent unit of conversion cost this month?
3. What is the cost that will be allocated to units completed and transferred out?
4. What is the cost that will be allocated to ending work in process?

* Provide your answer in excel