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McKay, Inc., produces a subassembly used in the production of hydraulic cylinders. The subassemblies are produced in three departments: Plate Cutting, Rod Cutting, and Welding.

McKay, Inc., produces a subassembly used in the production of hydraulic cylinders. The subassemblies are produced in three departments: Plate Cutting, Rod Cutting, and Welding. Materials are added at the beginning of the process. Overhead is applied using the following drivers and activity rates:

Driver
Rate
Actual Usage
(by Plate Cutting)
Direct labor cost
120% of direct labor
$330,000
Inspection hours
$40 per hour
4,002 hours
Number of moves
$100 per move
1,680 moves

During the first quarter, the Plate Cutting Department used 20,000 hours (direct, indirect, and machine hours) to produce the quarter's output. Other quarterly data for the Plate Cutting Department are as follows:

Beginning work in process, January 1
Units started90,000
Direct materials cost$720,000
Units, ending work in process (100%
materials; 64% conversion), March 31
6,000


  1. 1. Prepare a physical flow schedule.
  2. 2. Calculate equivalent units of production for:
  3. 3. Calculate unit costs for the following.
  4. 4. Provide the following information:
    a. The total cost of units transferred out
  5. b. The journal entry for transferring costs from Plate Cutting to Welding
  6. c. The cost assigned to units in ending inventory.
  7. 5. Suppose the plant manager asked the following questions:
  8. a. What is the actual cycle time for the conversion cost output for the plate subassembly 
  9. b. What is the conversion cost rate for the first quarter, using total conversion costs and total time
  10. c. What is the conversion cost per unit, using duration-based costing?
    d. According to production engineering, if efficiency were increased to an ideal level, then the cycle time should be 0.20 hours. If this were to occur, what would the cost per plate be?


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