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The Tattered Threads Shirt Company makes two types of T-shirts: basic and custom. Basic shirts are plain shirts without any screen printing on them. Custom shirts are created using the basic shirts and then adding a custom screen printing design 5 The company buys cloth in various colors and then makes the basic shirts in two departments, Cutting and 3 Sewing. The company uses a process costing system (weighted-average method) to determine the production cost of the basic shirts. In the Cutting Department, direct materials (cloth) are added at the beginning of the 9 process and conversion costs are added evenly through the process. In the Sewing Department, no direct 10 materials are added. The only additional material, thread, is considered an indirect material because it cannot 11 be easily traced to the finished product. Conversion costs are added evenly throughout the process in the Sewing 12 Department. The finished basic shirts are sold to retail stores or are sent to the Custom Design Department for 13 custom screen printing. 14 15 The Custom Design Department creates custom shirts by adding screen printing to the basic shirt. The 16 department creates a design based on the customer's request and then prints the design using up to four colors. 17 Because these shirts have the custom printing added, which is unique for each order, the additional cost incurred 18 is determined using job order costing, with each custom order considered a separate job. 19 20 For March 2021 the Tattered Threads Shirt Company compiled the following data for the cutting and Sewing Departments: 21 22 23 Department Item Amount Units 24 Cutting Beginning balance shirts 25 Started in March 1,411 shirts 26 Direct materials added in March 1,980 27 Conversion costs 1,380 28 Completed and transferred to Sewing ??? 1,411 shirts 29 Ending balance shirts Sewing Beginning balance, transferred in, $1458, 2,146 521 shirts 30 conversion costs, $688 31 Transferred in from Cutting ??? ??? 32 Conversion costs added in March 1,257 33 Completed and transferred to Finished Goods ??? 1,000 shirts 34 Ending balance, 63 complete ??? ??? 35 36 For the same time period, the Tattered Threads Shirt Company compiled the following data for the Custom 37 Design Department: 38 6 For the same time period, the Tattered Threads Shirt Company compiled the following data for the Custom -7 Design Department: -8 39 Job 90 Quantity Design Fee Printing 367 400 Yes 3 colors Status Complete 41 42 43 368 150 No 2 colors Complete 369 100 Yes 5 colors Complete 370 500 Yes 4 colors Complete 44 45 The Tattered Threads Shirt Company has previously determined that creating and programming the design cost 46 84 per design. This is a one time charge. 47 48 If a customer places another order with the same design, the customer is not charged a second time. 49 50 Additionally, the cost to print is 25 per color per shirt. 51 52 53 Requirements 54 C1. Complete a production cost report for the Cutting Department and the Sewing Department. What is the cost 55 of one basic shirt? 57 C2. Determine the total cost and the average cost per shirt for jobs 367, 368, 369, and 370. If the company set 58 the sales price at 225% of the total cost, determine the total sales price of each job. 56 59 65 67 60 C3. In addition to the custom jobs, the Tattered Threads Shirt Company sold 1250 basic shirts. If the company 61 set the sales price at 140% of the cost, determine the sales price per unit, total sales revenue, total cost of 62 goods sold, and total gross profit for the basic shirts. 63 ** (assume the beginning balance in Finished Goods Inventory is sufficient to make these sales, and the unit cost 64 of the basic shirts in Finished Goods Inventory is the same as the unit cost incurred this month) 66 C4. Calculate the total revenue, total cost of goods sold, and total gross profit for all sales, basic and custom 68 CS. Assume the company sold only basic shirts (no custom designs) and incurred fixed costs of $790 per month a. Calculate the contribution margin per unit, contribution margin ratio, required sales in units to break even, and required sales in dollars to break even. 71 b. Determine the margin of safety in units and dollars. c. Suppose the Tattered Threads Shirt Company wants to earn an operating income of $1240 per month Compute the required sales in units and dollars to achieve this profit epal Directions Comprehensive Reg2 + Ready 69 70 72 73 C2. Determine the total cost and the average cost per shirt for jobs 367, 368, 369, and 370. If the company set the sales price at 225% of the total cost, determine the total sales price of each job. Job 367 368 369 370 TOTALS $ 5585 COSTS: Basic shirt Design Cost Printing Cost Total Cost Cost per shirt Sales Price per shirt Total Sales 1,488 $ 84.00 300.00 1,872 4.68 15.21 6,084 S 372 $ 84.00 125.00 581 75.00 633 1,860 84.00 500.00 2,444 $ 5,530 4.89 15.89 7,943 $ 17,973 4.22 13.72 2,057 $ 5.81 18.88 1,888 $ $ C3. In addition to the custom jobs, the Tattered Threads Shirt Company sold 1250 basic shirts. If the company set the sales price at 140% of the cost, determine the sales price per unit, total sales revenue, total cost of goods sold, and total gross profit for the basic shirts. **(assume the beginning balance in Finished Goods Inventory is sufficient to make these sales, and the unit cost of the basic shirts in Finished Goods Inventory is the same as the unit cost incurred this month) Sales price per unit $ 435.78 Total Sales Revenue Total COGS Total GP 17973.00 6763.00 $ 17,973.00 C4. Calculate the total revenue, total cost of goods sold, and total gross profit for all sales, basic and custom Sales Revenue COGS GP Custom Shirts S 9,330 5,200 14,530 Basic Shirts + Totals S 16,794 5 26,124 6,500 11,700 23,294 CS. Assume the company sold only basic shirts (no custom designs) and incurred fixed costs of $790 per month a. Calculate the contribution margin per unit, contribution margin ratio, required sales in units to break even, and required sales in dollars to break even. Sales Revenue COGS GP Custom Shirts $ 9,330 5,200 14,530 Basic Shirts S 16,794 $ 6,500 23,294 Totals 26,124 11,700 Assume the company sold only basic shirts (no custom designs) and incurred fixed costs of $790 per month a. Calculate the contribution margin per unit, contribution margin ratio, required sales in units to break even, and required sales in dollars to break even. CM per unit $ 5.00 Req, sales in units 500 shirts CM Ratios 4% Req sales in $ = $ 1.00 b. Determine the margin of safety in units and dollars. Margin of safety in units = 800 shirts Margin of safety in s 4000 c. Suppose the Tattered Threads Shirt Company wants to earn an operating income of $1240 per month. Compute the required sales in units and dollars to achieve this profit goal. Req. sales in units 8,500 Req. sales in $ = $ 1,700 C6. The Tattered Threads Shirt Company is considering adding a new product line, a cloth shopping bag with custom screen printing that will be sold to grocery stores. If the current market prict of cloth shopping bags is $2.12 and the company desires a net profit of 62% what is the target cost? The company estimates the full product cost of the cloth bags will be $0.70. Should the company manufacture the cloth bags? Why or why not? 0.94 Target Cost Should they produce the bags? S No Explanation: eq2 +
