Beauville Furniture Corporation produces sofas, recliners, and lounge chairs. Beauville is located in a medium-sized community in the southeastern part of the United States. It is a major employer in the community. Beauville operates a sawmill, a fabric plant, and a furniture plant in the same community. The sawmill produces lumber for the furniture plant.
The sawmill buys logs from independent producers and then processes the logs into four grades of lumber:
1.firsts and seconds.2.No. 1 common.3.No. 2 common.4.No. 3 common.
All costs incurred in the mill are common to the four grades of lumber. All four grades of lumber are used by the furniture plant. The mill transfers everything it produces to the furniture plant at cost. Trucks are used to transport the lumber from the mill to the furniture plant. Although no outside sales exist, the mill could sell to external customers. Beauville knows the selling prices of the four grades.
The fabric plant is responsible for producing the fabric that is used by the furniture plant. To produce three totally different fabrics (identified by the ID codes FB60, FB70, and FB80, respectively), the plant has three separate production operations-one for each fabric. The production of all three fabric occurs at the same time in different locations in the plant. Each fabric's production operation has two processes: (1) the weaving and pattern process and (2) the coloring and bolting process. In the weaving and pattern process, yarn is used to create yards of fabric with different designs. In the next process, the fabric is dyed, cut into 25-yard sections, and wrapped around cardboard rods to form 25-yard bolts. The bolts are transported by forklift to the furniture plant's Receiving Department. Currently, all of the output of the fabric plant is used by the furniture plant to produce sofas and chairs. For accounting purposes, the fabric is transported at cost to the furniture plant.
The furniture plant produces orders for customers on a special-order basis. The customers specify the quantity, style, fabric, lumber grade, and pattern. Typically jobs are large averaging 500 units. However, some jobs involving more difficult-to-produce items are smaller and more specialized. The plant has two production departments: Cutting and Assembly. In the Cutting Department, the fabric and wooden frame components are sized and cut. Other components are purchased from external suppliers and are removed from stores as needed for assembly. After the fabric and wooden components are finished for the entire job, they are moved to the Assembly Department. The Assembly Department takes the individual components and assembles the sofas or chairs.
During the past five years, Beauville has experienced eroding profits and declining sales. Bids were increasingly lost on the more popular models. On average, a bid on a typical job involving 500 units was running about $20 per unit, or $10,000 more than the winning bid. Yet the company was winning most of the bids on the more-difficult-to-produce items. Lance Hays, the Owner and Manager, had recently commissioned his Vice President of Finance, Gisela Berling, to cost analysis of the company's product lines. Her initial efforts showed that bids could become more competitive using standard costing instead of normal costing in the fabric plant (although the decision to switch to standard costing was still being considered). She also saw a potential business opportunity in converting the fabric plant to a profit center. Encouraged by the insights of these initial efforts, she began exploring the costing practices of the three plants in more depth, including a second look at the fabric plant. The fabric plant manager had suggested a simple restructuring that promised some immediate cost savings and she wanted to assess the proposal. As the first step, she wanted to review the current costing approach for fabrics.
The fabric plant's cost accounting manager gathered the following data for last year's operations for the Vice President of Finance, Gisela:
The plant uses a plantwide overhead rate based on direct labor hours:
Assignment: case studyach 5 at o Asegtunentscore: U.UD% Emall instructor m ubmltA rim ntfarGraclng Questions Integrated Activity: Process casting II E Qnesumta or: 1' . n n 4 Previous I Need t 2_ 0 Step 1 chem My Walk (a rernarnirg) process Costing lnslructinns: Use Ihe labs above to navigate [lads and forlit between Steps. objective: Review basic process costing concepts - Click here to refer to the question information. Inlroduclinn: Beauville Furniture Corporation produces sofas, recliners, and lounge chairs. Beauville is located in a mediumrsized community in the southeastern part of the united states. It is a major employer in the community. Eeauville operates a sawmill, a fabric plant, and a fumiture plant in the same community. The sawmill pmduces lumber for thefurniture plant. The sawmill buys logs from independent producers and (hen premises the lugs into four grades 0f lumber: l.firsl!; and seconds. 2. Mo. 1 common. 3. Mo. 2 common. 4. Mo. 3 common. All costs incurred in the mill are common to the four grades of lumber. All four grades of lumber are used by the fumiture plant. The mill transfers erervthing it produces to the fumiture plant at cost. Trucks are used to transport the lumber from the mill to thefurniture plant. Although no outside sales exist, the mill could sell to extemal customers. Eeauville knows the selling grins of the four grades. The fabric plant is responsible for producing the fabric that is used by the fumiture plant. To produce three totally different fabrics (identied by the [D codes Feet], ram, and FEB", respecdvely), the plant has three separate production operationsrone for each fabric. The production of all three fabric occurs at the same time in different locations in the plant. Each fabric's production operation has two processes: (1) the weaving and pattent process and (2) the coloring and bolting process. In the weaving and pattern process, yarn is used to create vards of fabric with drferent designs. In the next process. the fabric is dyed, out into zsayard seodons, and wrapped around cardboard rods to form 25ryard bolts. The bolts are transported by forklift to the furniture plant's Receiving Department. Currently, all of the output of the fabric plant is used by the furniture plant to produce sofas and mairs. Fur accounting purposes, the faori s transported at cost to the fumiture plant. The fumitill'e nlanl nroduDes orders for customers on a Svecialrarder basis. The customers Specify the quantity. style, fabric. lumber grade, and namem. Tynically jobs are large averaging 500 units. However, some jobs involving more difcultrtosproduoe items are smaller and more Suecialized. The plant has two production denamnents: Cutting and Assembly. In the Cultng Denartmenl, the fabric and wooden frame components are siled and cut. Other components are purchased from edemal suonliers and are removed from stores as needed for assembly. After lhe fabric and wooden components are nished for the enlirejnb, lhey are moved to the Assembly Denartment. The Assembly DeDartmenl takes the in ividual oomnonents and assembles the sofas nr chairs. boring the past live years, Beauville has experienced eroding prots and dxlining sales. bids were increasingly lost on the more popular models. on average, a bid on a typical job involving 500 unibr was running about 520 per unit, or $10,000 more than the winning bid. Yet the company was winning most of the bids on the murerd'lcultrtacnroduoe items. Lance Hays, the owner and Manager. had recently oomnlissiuned his vice President of nance. Gisela Belling, to do a cost analysis dfthe company's productlines. Her in 'al efforts showed that bids could become more competitive using standard costing instead of normal costing in the fabric plant (although the dxisiun to switch to standard costing was still being considered). She also saw a potential business opportunity in converting the fabric plant In a prot center. EnDouraged by the insights of these initial Effufli. she began exploring lhe costing nraCtioes of the lhree Dlants in more dent'h, including a second Iank at the fabric plant. The fabric nlant manager had suggested a simple restructuring that promised mm immune... \"as Mama "at arm "mama M \"an... otm "manna. ha n." or arm. at." \"Nona M masons... mm". Mm\" \"News say one.\" During the vast tive Years. Beauviile has experienced eroding aroma and declining sales. Bids were increasingly inst an the more annular models. On average, a bid on a tybical jut) involving 50D units was running about 520 per unit, Df 510,000 mnre than the winning hid. Yet the mmpany was winning most orthe bids on the mnrerdiieultrturprodune items. Lance Hays, the ewner and Manager, nad reoenUy mmlllissinned his vice President of nance, Gisela Berting, tn do a cost analysis dime Dolnpany's produetlines. Her initial elforLr. showed that bids could become more cDmDetitive using standard casting instead of nurrnal costing in the fabric Dlant (allhnuh the decisinn to switch to standard casting was still being cunsidered). She also saw a notential business apnortunity in mnverting the fabric Plant tn a prot center. Encouraged by the insights of these initial efforts. she began exploring the casting nractioes of the three wants in more death, including a second leak at the fabric nlant. The fabric plant manager had suggted a Simple restructuring mat promised some immediate cost savings and she wa llted tn assess the pmudsal. As the rst step, she wanted to review the mrrent anTJ'ng aunroach for iabrils. The labric plant's cast accuunl'lng manager gathered the full owing data for last years operations in the vice President of Finance, Gisela: The talent uses a DIantwide overhead rate based on dil'EEt labor hours: Budgeted overhead: $1,200,000 (50% xed) Expected actual volume (direct lalmr hours): 119,004] hours Actual warhead: $1,150,000 [50% xed) Actual hours worked: The inlll'lwillg departmental data was also Provided for Fabric FBTD [actual Drillle inletsV aDDlied overhead. and actual outcames): Materials $90,000 39, W0 Overhead $22000 39. W0 units started some 7 mliinquIVFWF 3,99% , 'Unils are measured in yards fur the Weaving and Pattern Devarlment and in balls for the Calming and Eolting Dwartment. All materials are added at the beginning uf each nrnuess (except for the cardhnard bgll mds; however, the cost tithe rods is relatively insignicant and is ind uded in overhead. Required: 1. Using the weighted average method, minnIeIe the inllinning information regarding the Weaving and Paltenl nmduclinn pmcess for Fabric F370. 3. Physical I'IMV schedulE [measured in Yards): Be niilg inventory Jim 40% A 'Unim are measured in Vi'li fur the Weaving and Pattern Department and in balls for the Coloring and Baiting Dellartrnenl. All materials are added at the beginning (If each amines: (except for the Cardhlzard bull lads; however, the :05! ml the rods is relatively insignicant and is included in overhead. Required: 1. using the weighted average method, oomplete ure rollouring information regarding the Weaving and Pattern production pmcess ror Fahric Find. a. Physical ilnw schedule [measured in Yards): h. Equivalent unite; schedule (measured in yards): 0 he completed total Yards 1:. Unil cast (round intermediate Dompulations and nal answer fur unit cast to nearest cenl, use the rounded answer in subsequent requiremenis, if required): Q d. Cast of goods lransierred mlt: sl l 2. using the weighted average method complete the following fur the Calming and aolting process: a. Physical ilnw schedule [measured in hulls): 3W1? Tuna! HIH ) 2. Using the weighted average method cDmDIete the following finr the Calorinn and uniting Droness: a. physical new schedule (measured in twin): b. Equivalent unis schedule (measured in DME): Unilsmnnleted |: new I: l:] II t. Unit cast: 5' | summary Qumions: LThe nulnut for the Weaving and Pattern Denartmeni is measured in . 1. To convert the output ufthe Weaving and Pattern Department tn the mutant ofthe Cnlorim] and Baiting Deuarlmenl, yards transferred is - Sdamr nus-ru- 3. Based an the ram: above, assuming FIFO had [men used fur Coloring and Bult'lng, pmvide the equivalent units for each of the falluwing: Transferred in materials: | Materials: Cunversion cwsls: cneck My qukG lemaln'nn) 0! Indulg- "negated Aniuity: Prunes: Casting II 4 quesuun: of} instru mr
