ii

Over the last year, Lovata Company has installed a flexible manufacturing system in its plant. The compnay has made extensive changes to the flow of its single product through the various cells, and as of the beginning of last month the company initiated a JIT inventory system. In the past, the company was required to carry a large work in process inventory because of a poor flow of materials between workstations. But JIT, in conjunction with FMS, has allowed the company to control this flow and to avoid any buildup of materials within the cells. Production data for last month follow Units Materials Conversion Work in process, May 1 40,000 $ 53,000 $ 10,000 Started into production 280,000 Completed and transferred out 320,000 ? ? Work in process, May 31 Cost added during the month 491,000 278,000 The May 1 work in process inventory was 75 percent complete as to materials and 25 percent complete as to conversion costs. The company uses the weighted average method to account for cost flows. Required 1. Prepare a production report for the month of May 2. Assume that in June the company begins to experience greater efficiency in its operations so that it is able to introduce 350,000 units into production and operate strictly in accordance with JIT concepts. (That is, work in process is maintained at a zero level.) The company incurs $560,000 in material costs during the month and $280,000 in conversion costs. Prepare a production report for the month of June. 3. Examine the report you have just prepared. How (if at all) would the report differ if the company were using the FIFO method to account for cost flows