Part 2 Chapters 5-10 Beauville Furniture Corporation produces sofas, recliners, and lounge chairs, Beauvile is located in a medium-sized community in the southeastern part of the United States. It is a major employer in the community. In fact, the economic well-being of the community is tied very strongly to Beauville. Beau ville operates a sawmill, a fabric plant, and a furniture plant in the same community The sawmill buys logs from grades of lumber: firsts and seconds, No. 1 ccmmon, No. 2 common, and No. 3 common. All costs incurred in the mill are common to the four graces of lumber tour grades af lumber are used by the furniture plant. The mill transfers everything it produces to the fumiture plant, and the grdes are trans- ferred at cost Trucks are used to mave the lumber from the mill to the furniture pant. Although no outside ales ex st, the mill could sell to extemal customers, and the selling prices of the four grades are known l independent producers. T en processes the lcgs into four The fabric plant is responsible for producing the fabric that is used by the funiture plant. To pro- duce three totally different fabrics (identified by fabric ID codes FB60, FB70, and FB80, rospectively the plant has three separate production operations one for each fabric. Thus, production of all three fabrics occurs at the sarma time in ciffrent locations in the plant. Each fabric's production operation has two processes: the weaving and pattem process and the coloring and bolting process. In the ing and pattern process, yan is used to create yards of fabric with different designs. In the next pro the fabric is dyed, cut intn 25 yarrd sections, and wrapped arnund cardhoard rods to form 25 yard Receiving Department. All of the out- bolts. The bolts are transported by forklift to the fumiture plant's put of the fabric plant is used by the furniture plant [to produce the sofas and chairs). For accounting purpcses, the fabric is transferred at cost to the furniture plant. The fumiture plant produces orcers for customers on a special-order basis. The customers specify the quarntity, style, fabri lunber grade, and pattern. Typically, jobs ar ag nvolving at least 500 units). The plant has two production departments: Cutting and Assembly. In the Cutting Depart ment, the fabric and wooden frame components are sized and cut. Other components are purchased from external suppliers and are removed from stares as needed for assembly. After the fabric and wooden components are finished for tne entire job, they are moved to the Assembly Deoaent. The Assombly Department takes the individual components and asscmbles the sofas (or chairs). Beauville Furniture ha business for over two decades and has a good reputation. However during the past five years, Beauville experienced eroding prof ts and declining sales Bids were increas- ingly last (even aggressive bids) on the more popular models. Yet, the company was winning bids on some of the more-difficult-to-produce items. Lance Hays, the cwner and manager, was frustrated. He simply couldn't understand how some of his competitors could sell for such low prices, On a common sofa job involving 500 units, Beauville's bids were running $25 per unit, or $12,500 per job more than the winning bids on average). Yet, on the more ditticult items, Beauville's bics were running about $60 per unit less than the ncxt clost bid, Giscla Bcrling, vice president of finance, was assignod the task of preparing a cost analysis of the company's product lines. Lance wanted to knaw if the com- pany's costs wore oxcossive. Pcrhaps the company was boing wasteful, and it was simply costing more to preduce furniture than it was costing its competitors. Gisela prepared herself by reading recent literature on cost management and product costing and attending several conferences that explored the same issues. She then reviewed the costing proce- dures of the company's mill and two plants and did a preliminary assessment of their soundness. The production costs of the mill were common to all lumber grades and were assigned using the urnits method. Since the output and production costs were fairly uniform throughout the year, the mill used an actual costing system. Although Gisela had no clifficulty with actual costing. she decided to Part 2 Chapters 5-10 Beauville Furniture Corporation produces sofas, recliners, and lounge chairs, Beauvile is located in a medium-sized community in the southeastern part of the United States. It is a major employer in the community. In fact, the economic well-being of the community is tied very strongly to Beauville. Beau ville operates a sawmill, a fabric plant, and a furniture plant in the same community The sawmill buys logs from grades of lumber: firsts and seconds, No. 1 ccmmon, No. 2 common, and No. 3 common. All costs incurred in the mill are common to the four graces of lumber tour grades af lumber are used by the furniture plant. The mill transfers everything it produces to the fumiture plant, and the grdes are trans- ferred at cost Trucks are used to mave the lumber from the mill to the furniture pant. Although no outside ales ex st, the mill could sell to extemal customers, and the selling prices of the four grades are known l independent producers. T en processes the lcgs into four The fabric plant is responsible for producing the fabric that is used by the funiture plant. To pro- duce three totally different fabrics (identified by fabric ID codes FB60, FB70, and FB80, rospectively the plant has three separate production operations one for each fabric. Thus, production of all three fabrics occurs at the sarma time in ciffrent locations in the plant. Each fabric's production operation has two processes: the weaving and pattem process and the coloring and bolting process. In the ing and pattern process, yan is used to create yards of fabric with different designs. In the next pro the fabric is dyed, cut intn 25 yarrd sections, and wrapped arnund cardhoard rods to form 25 yard Receiving Department. All of the out- bolts. The bolts are transported by forklift to the fumiture plant's put of the fabric plant is used by the furniture plant [to produce the sofas and chairs). For accounting purpcses, the fabric is transferred at cost to the furniture plant. The fumiture plant produces orcers for customers on a special-order basis. The customers specify the quarntity, style, fabri lunber grade, and pattern. Typically, jobs ar ag nvolving at least 500 units). The plant has two production departments: Cutting and Assembly. In the Cutting Depart ment, the fabric and wooden frame components are sized and cut. Other components are purchased from external suppliers and are removed from stares as needed for assembly. After the fabric and wooden components are finished for tne entire job, they are moved to the Assembly Deoaent. The Assombly Department takes the individual components and asscmbles the sofas (or chairs). Beauville Furniture ha business for over two decades and has a good reputation. However during the past five years, Beauville experienced eroding prof ts and declining sales Bids were increas- ingly last (even aggressive bids) on the more popular models. Yet, the company was winning bids on some of the more-difficult-to-produce items. Lance Hays, the cwner and manager, was frustrated. He simply couldn't understand how some of his competitors could sell for such low prices, On a common sofa job involving 500 units, Beauville's bids were running $25 per unit, or $12,500 per job more than the winning bids on average). Yet, on the more ditticult items, Beauville's bics were running about $60 per unit less than the ncxt clost bid, Giscla Bcrling, vice president of finance, was assignod the task of preparing a cost analysis of the company's product lines. Lance wanted to knaw if the com- pany's costs wore oxcossive. Pcrhaps the company was boing wasteful, and it was simply costing more to preduce furniture than it was costing its competitors. Gisela prepared herself by reading recent literature on cost management and product costing and attending several conferences that explored the same issues. She then reviewed the costing proce- dures of the company's mill and two plants and did a preliminary assessment of their soundness. The production costs of the mill were common to all lumber grades and were assigned using the urnits method. Since the output and production costs were fairly uniform throughout the year, the mill used an actual costing system. Although Gisela had no clifficulty with actual costing. she decided to