B 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. The company buys cloth in various colors and then makes the basic shirts in two departments, Cutting and 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 process and conversion costs are added evenly through the process. In the Sewing Department, no direct materials are added. The only additional material, thread, is considered an indirect material because it cannot be easily traced to the finished product. Conversion costs are added evenly throughout the process in the Sewing Department. The finished basic shirts are sold to retail stores or are sent to the Custom Design Department for custom screen printing. The Custom Design Department creates custom shirts by adding screen printing to the basic shirt. The department creates a design based on the customer's request and then prints the design using up to four colors. Because these 5 shirts have the custom printing added, which is unique for each order, the additional cost incurred is determined using job order costing, with each custom order considered a separate job. For March 2021 the Tattered Threads Shirt Company compiled the following data for the Cutting and Sewing Departments: 2 3 Department Item 4 Cutting 5 Amount Units Beginning balance Started in March shirts 1,411 shirts 6 Direct materials added in March 1,980 7 Conversion costs 1,380 8 Completed and transferred to Sewing ??? 9 Ending balance 1,411 shirts shirts Sewing Beginning balance, transferred in, $1458; conversion 2,146 521 shirts 0123. costs, $688 Transferred in from Cutting ??? ??? Conversion costs added in March 1,257 Completed and transferred to Finished Goods ??? 1,000 shirts 4 Ending balance, 63% complete ??? ??? 35 Job Quantity Design Fee Printing Status 367 400 Yes 3 colors Complete 368 150 No 2 colors Complete 369 100 Yes 5 colors Complete 370 500 Yes 4 colors Complete The Tattered Threads Shirt Company has previously determined that creating and programming the design cost per design. This is a one time charge. 84 If a customer places another order with the same design, the customer is not charged a second time. Additionally, the cost to print is .25 per color per shirt. Requirements C1. Complete a production cost report for the Cutting Department and the Sewing Department. What is the cost of one basic shirt? 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. 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) C4. Calculate the total revenue, total cost of goods sold, and total gross profit for all sales, basic and custom. 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. 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 goal. 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 price of cloth shopping bags is $2.12 and the company desires a net profit of 62% what is the target cost? Req C1. Complete a production cost report for the Cutting Department and the Sewing Department. What is the cast of ene basic shirt? The Tattered Threads Shirt Company Production Cost Report-Cutting Dept Month Ended March 2021 Equivalent Units Direct d. UNITS Whole Units Materials Conversion Costs hed Units to account for Beg. WP eve S Started in Production Total Units to Account for Units accounted for: Completed & trifout End W Total units accounted for COSTS Costs to account for Beg. WIP Costs added during period Total costs to account for total EUP Cost per EU Costs accounted for: Completed & Trif out Ending WIP Total costs accounted for Direct Conversion Total Costs T U AA All AC AD A AG A A C2. Determine the total cost and the average cost per shirt for jobs 367, 368, 369, and 370. the company set the sales price at 225% of the total cost, determine the total sales price of each jo Job COSTS Basic shirt Design Cost Printing Cost Total Cost Cost per thirt Sales Price per shar Total Sales 367 368 370 TOTALS C3. In addition to the custom jobs, the Tattered Threads Shirt Company sold 1250 basic shirts of 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 jassame 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 concurred the month) Sales price per unit Total Sales Revenue Total COGS Total GP 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 Basic Shirts Tota Production Cost Report- Sewing Dept Month Ended March M AB A AH A N UNITS Whole Units Transferre Equivalent Units Direct Conversion Units to account for CS. Assume the company sold only basic shirts (no onture designs) and incurred fled costs of 5750 per month Calculate the contribution margin per unit, contribution margin rate, required sales i even, and required sales in dollars to break even leg. WIP Transferred in CM per unit CM Ratio 5 Total Units to Account for Units accounted for: Completed & trs aut End WIP Total units accounted for COSTS Costs to account for Beg. Wip Na Dred Conversion Total Costs Costs added during period n/a Total costs to account for N/A +total EUP Cost per EU 1/4 Costs accounted for Completed & Trst out No Ending WIP N/A Total costs accounted for n/a Cost of one basic shirt- 5. Determine the margin of safety in units and arts Margin of safety in units Margin of safety in S Suppose the Tattered Threadh Shet Company wants to earn an operating income of $134 Compute the required sales in units and dollars to achieve the profit goal Reqsales in 5 Jos. The Tattered Threads Shart 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 cument market price of cloth shopping bags $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 50.70. Should the company manufacture the cloth bags? Why or why not? Target Cost Should they produce the baps? Explanation