Question
Melbourne Cup. Manufacturing Company manufactures its product in the cutting department, and adopts a process costing system. During February, the beginning work in process in
Melbourne Cup. Manufacturing Company manufactures its product in the cutting department, and adopts a process costing system. During February, the beginning work in process in the cutting department was 50% complete as to conversion, and 100% complete as to direct materials. The beginning work-in-process inventory included $12,000 for materials and $3,000 for conversion costs. Ending work-in-process inventory in the cutting department was 40% complete regarding conversion and 100% complete regarding direct material.
Additional information about the cutting department follows:
| Cutting Dept. |
Units in work-in-process, beginning | 20,000 |
Units started this period | 40,000 |
Units completed this period | 50,000 |
Units in work-in-process, ending | 10,000 |
Direct material costs added | $42,000 |
Direct manufacturing labor cost | $18,700 |
Other conversion costs | $21,500 |
- Suppose the managers bonus depends on the gross margin generated by the 50,000 units completed and sold in the current period. At the end of the period, the manger finds that the gross margin does not look good. Sales price for the 50,000 units is fixed. What would the manager ask the management accountant to do to help him achieve higher bonus? Please provide justification. (5 marks)
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