Case on Job-Order Costing and Pricing Decisions

Nutratask, Inc., is a pharmaceutical manufacturer of amino-acid-chelated minerals and vitamin supplements. The company was founded in 1974 and is capable of performing all manufacturing functions, including packaging and laboratory functions. Currently, the company markets its products in the United States, Canada, Australia, Japan, and Belgium.

Mineral chelation enhances the mineral's availability to the body, making the mineral a more effective supplement. Most of the chelates supplied by Nutratask are in powder form, but the company has the capability to make tablets or capsules.

The production of all chelates follows a similar pattern. Upon receiving an order, the company's chemist prepares a load sheet (a bill of materials that specifies the product, the theoretical yield, and the quantities of materials that should be used). Once the load sheet is received by production, the materials are requisitioned and sent to the blending room. The chemicals and minerals are added in the order specified and blended together for two to eight hours, depending on the product. After blending, the mix is put on long trays and sent to the drying room, where it is allowed to dry until the moisture content is 7 to 9 percent. Drying time for most products is from one to three days.

After the product is dry, several small samples are taken and sent to a laboratory to be checked for bacterial level and to determine whether the product meets customer specifications. If the product is not fit for human consumption or if it fails to meet customer specifications, additional materials are added under the direction of the chemist to bring the product up to standard. Once the product passes inspection, it is ground into a powder of different meshes (particle sizes) according to customer specifications. The powder is then placed in heavy cardboard drums and shipped to the customer (or, if requested, put in tablet or capsule form and then shipped).

Since each order is customized to meet the special needs of its customers, Nutratask uses a job-order costing system. Recently, Nutratask received a request for a 300-kilogram order of potassium aspartate. The customer offered to pay $8.80/kg. Upon receiving the request and the customer's specifications, Lanny Smith, the marketing manager, requested a load sheet from the company's chemist. The load sheet prepared showed the following material requirements:

Assignment case Studvrcll s a 6 Asstg'nmem score: time. Email in tructor uomlt Assignment tor Grading ' questions apart-omen: as.\" i Questionl at] o 1. 0 A . . CheckMy Work (3 lemalnlng) 1. O 3. O I'mbleln 5.34 case on lehsorder Costing and pricing Decisions "unmask, Inc.. is a pharmaceutical manufacturer of amino-acid-dlelated minerals and vitamin EIIDDlEmEnIs. The Damnany was founded in 1974 and is callable 0f neri'urrninu all manufatiurinu luncuns, including packaging and lahm'atnry funcliuns. Currently, (lie Dompany markets its products in the united States. Canada. Australia. Janan, and Belgium. Mineral chelation enhanoes the minerals availability to the body, making the mineral a more effective supplement. Most (if the chelates supplied by Nutratask are in powder furrn, but the oompany has the capability to make tablets or capsules. The prudu ion or all chelates follows a siml arpattern. UDnn receiving an order, the company's chemist prepares a load sheet (a bill of materials that spedlies the omduct, the theoretical yield, and the quantities of materials that should be used). Once the load sheetis received by produotion the materials are reoui tioned and sent to the blending room. The chemicals and minerals are added in the order speded and blended together tor two to eight hours, depending on the produot. Alter blending, the mix is put on long trays and sent to the drying mom. where it is allnwed [ dry until the moisture cnnlenl is 7 he 9 nercenl. Drying time for mnsi nrodupts is {mm one in three days. After the produot is dry. several small samples are taken and sent to a laboratmv to lie checked for bacterial level and to determine whether the product meets customer specications. If the pnrduct is not lit for human consum ption or if it fails to meet customer specications. additional materials are added underthe direction drthe chemist to bring the product up to standard. Once the pmducl passes inspection, it is ground into a powder 0f dinerent meshes (particle sizes) according to customer spedncations. The powder is then placed in heavy cardboard drums and shipped to the customer (or. if requested, put in tablet or capsule tom and then shipped). sinoe each order is custnmiled to meet the special needs (if its customers, Nutratask uses a jpbsonler Dusting system. Recently, nutratask received a request for a Simskilugram order or potassium aspartate. The customer olrered to pay seep/kg. Upon receiving the request and the customer's Suedcations. Lannv Smith, the marketing manager, requested a load sheet from the company's chemist. The load sheet prepared showed the following material reguirements: Macaw Anni-II pod-bed Aspens acid losmkg C'uic and limits leeway 1215M; ltioc mm; The iepret'lcal Yield is 300 kg. Lanny also reviewed Dastiohs that were similar to the requested order and discovered Ihat the expmed direct Iahortime was 15 hours. The production workers at Nutmzsk earn an average nf $11.50 Der hour. Pu mhasi he sent Lanny a list of wines for tile materials needed for \"I! job. Malaill Mpenl: and 35.75 curls and 2.02 K100) 64 Rice 0A} overhead is applied using a oompanywide rate based on directlabor dollars. The rate fer the current period is no percent t1f direlt labordollars. Whenever a :uslnmer [Equals a bid, Nulratask usually estimates the manufacturing cpsls ufthe inb and then adds a markup elf 30 Dercent. This markup varies denendinq on Ihe campeh'linn and general emnmnic conditions. Currently, [he industry'ls Hiriv'lng, and Nutralaskis operating at canacil'l. Reuuilled: Whenever a custnmer red uests a hid, Nutratask usuaily estimates the manufacllt ring casts m the int) and then adds a markup m 30 uereent. This markup van es depending on the enmnetrtiun and general emrmlntc conditions. Currentiy, the industry is mnving, and Nutratask is upentiltg at maturity. Reunited: 1. Prenare a iohrorder cost sheet tar die nronosed job. If reduired, round your answers to the nearest cent. Job-urdlr can shut Job Putasjnm Aspanace DI .ct labor uu-rhead Wee _ [late (a) Aspartic (3th 1 e igcua ruse mt summary Dirac: meeuals m rec: lahur Overhead Intel cest Kg Dun: cast Fur the tntirrwinu: when required, multd Yaur answers tn the nearest cent. wtiat is the expected penunit Dost including the markun (the price charged)? 3 ' per unit Shnuld Nutratask aDceDI the mice offered by the nrosneclive custamer'l 2. Supnnse Nutmtask and the nrosuective custumer auree on a nrice nt DOSl Dhls 3n percent. what is die Limes pmt that ttutratask 5|:er tn earn an die iob? Rnund your intermediate and nal answers to the nearest cent. Dlrect lahur A overhead Inna) coal: s [(9 um: Casi: s Fur the luliuwing: when required, mund yum answers tn the nearest cent. what is the expected Derrunil cost indudinu the markup (the price charged)? 3 per unit Shuuld Nutratask accept the price Difered hy the prospective custerner: 2. Suppose Nmmlask and the prospective custumer agree on a price nf cost pins an percent. what is the gmss pml that nutratask apect: te earn an the job? Rnund your intermediate and nal answers to the nearest cent. 3 3. suppose that the actual casts pf pmduc'mg Jon kg uf potassium asuartate were as fulluws: Rnund yaur ermediate and final answers to the nearest cent. Talnl Mala-iii]: DCEI H.790\") Di tact Ink: 3 225.00 Ottcrhmti 247.50 what is the actual nerrunil cast? 5 per unit The ma price is hased an expected custs. How much did Nutratask gain (nr iuse) because of the actual costs diering from the expected costsv i.saee......,m..a,. v i s Chet-ltMy Waring mmaining) v o- rmrey MHiPrulEm [5.3\" QIIESEiDII 1 at] it uhmit A nment lur Gramnp