Sawmill: Joint manufacturing costs: $900,000 Grade Firsts and seconds No. 1 common No. 2 common No. 3 common Total Quantity Produced (board feet) 1.500.000 3,000,000 1,875,000 1,125,000 7,500,000 Price at Split-Off (per 1,000 board foot) $300 225 140 100 Weaving and Coloring and Pattern Bolting Materials $80,000 $8,000 Labor $18,000 $6,600 Overhead $22,000 $9,000 Current production: Units started 80,000 ? Units transferred out 80,000 3,200 Costs: Transferred in $0 ? Materials $320,000 $82,000 Labor $208,000 $ $99,400 Overhead ? ? Percentage completion Beginning inventory 30% 40% Ending inventory 40% 50% *Units are measured in yards for the Weaving and Pattern Department and in bolts for the Coloring and Bolting Department. Note: With the exception of the cardboard bolt rods, materials are added at the beginning of each process. The cost of the rods is relatively insignificant and is included in overhead Fabric Plant: Budgeted overhead: $1,200,000 (50% fixed) Practical volume direct labor hours): 120,000 hours Actual overhead: $1,150,000 (50% fixed) Actual hours worked: Fabric FB60 Fabric FB70 Fabric FB 80 Total Weaving and Pattern 20,000 28,000 26,000 74,000 Coloring and Bolting 12,000 14,000 18,000 44,000 Total 32,000 42,000 44,000 118,000 Proposed standard cost sheet for Fabric FB70 (for the Coloring and Bolting Department only: Departmental data on Fabric FB70 (actual costs and actual outcomes): Transferred-in materials (25 yards @ $10) Other materials (100 ounces @ $0.20) Labor (3.1 hours $8) Fixed overhead (3.1 hours @ $5) Variable overhead (3.1 hours @ $5) @ $5 Standard cost per unit $250.00 $ 20.00 24.80 15.50 15.50 $325.80 Weaving and Pattern Coloring and Bolting 20,000 400 Beginning inventories: Units Costs: Transferred in SO $100,000 Furniture Plant: Departmental data (budgeted) assembly. Recently, the company seemed to be winning more bids on jobs of this type. To compute the costs of the two jobs, Gisela assembled the following information on the two jobs Job A500: : Service Departments Producing Departments Receiving Power $450,000 $600,000 Maintenance $300,000 General Factory $525,000 Cutting Assembly $750,000 $375,000 60,000 15.000 13,500 9,000 15,000 10,000 50.000 200.000 180 bolts @ $350 20,000 board feet @ $0.12 $26,600 Overhead Machine hours Receiving orders Square feet Direct labor hours 1,000 Direct materials: Fabric FB70 Lumber (No. 1 common) Other components Direct labor: Cutting Department Assembly Department Machine time Cutting Department Assembly Department 5,000 4,000 400 hours $10 1,600 hours @ $8.75 350 machine hours 50 machine hours Job B75: After some discussion with the furniture plant controller, Gisela decided to use machine hours to calculate the overhead rate for the Cutting Department and direct labor hours for the Assembly Department rate (the Cutting Department was more automated than the Assembly Department). As part of her report, she wanted to compare the effects of plantwide rates and departmental rates on the cost of jobs. She wanted to know if overhead costing could be the source of the pricing problems the company was experiencing To assess the effect of the different overhead assignment procedures, Gisela decided to examine two prospective jobs. One job, Job A500, could produce 500 sofas, using a frequently requested style and Fabric FB70. Bids on this type of job were being lost more frequently to competitors. The second job, Job B75, would produce 75 specially designed recliners. This job involved a new design and was more difficult for the workers to build. It involved some special cutting requirements and an unfamiliar 26 yards @ $350 2,200 board feet @ $0.12 $3,236 Direct materials: Fabric FB 70 Lumber first and seconds) Other components Direct labor: Cutting Department Assembly Department Machine time: : Cutting Department Assembly Department 70 hours $10 240 hours @ $8.75 90 machine hours 15 machine hours 9. Calculate the following overhead rates for the furniture plant: (1) plantwide rate and (2) depart mental rates. Use the direct method for assigning service costs to producing departments. 10. For each of the overhead rates computed in Requirement 9, calculate unit bid prices for Jobs A500 and B75. Assume that the company's aggressive bidding policy is unit cost plus 50 percent. Did departmental overhead rates have any effect on Beauville's winning or losing bids? What recommendation would you make? Explain. Now, adjust the costs and bids for departmental rate bids using the proposed standard costs for the Coloring and Bolting Department. Did this make a difference? What does this tell you? 11. Suppose that the fabric plant is set up as a profit center. Bolts of Fabric FB70 sell for $400 (or can be bought for $400 from outside suppliers). The fabric plant and the furniture plant both have excess capacity. Assume that Job A500 is a special order. The fabric and furniture plants have sufficient excess capacity to satisfy the demands of Job A500. What is the minimum transfer price for a bolt of FB70? If the maximum transfer price is $400, by how much do the fabric plant's prof- its increase if the two profit centers negotiate a transfer price that splits the joint benefit? Sawmill: Joint manufacturing costs: $900,000 Grade Firsts and seconds No. 1 common No. 2 common No. 3 common Total Quantity Produced (board feet) 1.500.000 3,000,000 1,875,000 1,125,000 7,500,000 Price at Split-Off (per 1,000 board foot) $300 225 140 100 Weaving and Coloring and Pattern Bolting Materials $80,000 $8,000 Labor $18,000 $6,600 Overhead $22,000 $9,000 Current production: Units started 80,000 ? Units transferred out 80,000 3,200 Costs: Transferred in $0 ? Materials $320,000 $82,000 Labor $208,000 $ $99,400 Overhead ? ? Percentage completion Beginning inventory 30% 40% Ending inventory 40% 50% *Units are measured in yards for the Weaving and Pattern Department and in bolts for the Coloring and Bolting Department. Note: With the exception of the cardboard bolt rods, materials are added at the beginning of each process. The cost of the rods is relatively insignificant and is included in overhead Fabric Plant: Budgeted overhead: $1,200,000 (50% fixed) Practical volume direct labor hours): 120,000 hours Actual overhead: $1,150,000 (50% fixed) Actual hours worked: Fabric FB60 Fabric FB70 Fabric FB 80 Total Weaving and Pattern 20,000 28,000 26,000 74,000 Coloring and Bolting 12,000 14,000 18,000 44,000 Total 32,000 42,000 44,000 118,000 Proposed standard cost sheet for Fabric FB70 (for the Coloring and Bolting Department only: Departmental data on Fabric FB70 (actual costs and actual outcomes): Transferred-in materials (25 yards @ $10) Other materials (100 ounces @ $0.20) Labor (3.1 hours $8) Fixed overhead (3.1 hours @ $5) Variable overhead (3.1 hours @ $5) @ $5 Standard cost per unit $250.00 $ 20.00 24.80 15.50 15.50 $325.80 Weaving and Pattern Coloring and Bolting 20,000 400 Beginning inventories: Units Costs: Transferred in SO $100,000 Furniture Plant: Departmental data (budgeted) assembly. Recently, the company seemed to be winning more bids on jobs of this type. To compute the costs of the two jobs, Gisela assembled the following information on the two jobs Job A500: : Service Departments Producing Departments Receiving Power $450,000 $600,000 Maintenance $300,000 General Factory $525,000 Cutting Assembly $750,000 $375,000 60,000 15.000 13,500 9,000 15,000 10,000 50.000 200.000 180 bolts @ $350 20,000 board feet @ $0.12 $26,600 Overhead Machine hours Receiving orders Square feet Direct labor hours 1,000 Direct materials: Fabric FB70 Lumber (No. 1 common) Other components Direct labor: Cutting Department Assembly Department Machine time Cutting Department Assembly Department 5,000 4,000 400 hours $10 1,600 hours @ $8.75 350 machine hours 50 machine hours Job B75: After some discussion with the furniture plant controller, Gisela decided to use machine hours to calculate the overhead rate for the Cutting Department and direct labor hours for the Assembly Department rate (the Cutting Department was more automated than the Assembly Department). As part of her report, she wanted to compare the effects of plantwide rates and departmental rates on the cost of jobs. She wanted to know if overhead costing could be the source of the pricing problems the company was experiencing To assess the effect of the different overhead assignment procedures, Gisela decided to examine two prospective jobs. One job, Job A500, could produce 500 sofas, using a frequently requested style and Fabric FB70. Bids on this type of job were being lost more frequently to competitors. The second job, Job B75, would produce 75 specially designed recliners. This job involved a new design and was more difficult for the workers to build. It involved some special cutting requirements and an unfamiliar 26 yards @ $350 2,200 board feet @ $0.12 $3,236 Direct materials: Fabric FB 70 Lumber first and seconds) Other components Direct labor: Cutting Department Assembly Department Machine time: : Cutting Department Assembly Department 70 hours $10 240 hours @ $8.75 90 machine hours 15 machine hours 9. Calculate the following overhead rates for the furniture plant: (1) plantwide rate and (2) depart mental rates. Use the direct method for assigning service costs to producing departments. 10. For each of the overhead rates computed in Requirement 9, calculate unit bid prices for Jobs A500 and B75. Assume that the company's aggressive bidding policy is unit cost plus 50 percent. Did departmental overhead rates have any effect on Beauville's winning or losing bids? What recommendation would you make? Explain. Now, adjust the costs and bids for departmental rate bids using the proposed standard costs for the Coloring and Bolting Department. Did this make a difference? What does this tell you? 11. Suppose that the fabric plant is set up as a profit center. Bolts of Fabric FB70 sell for $400 (or can be bought for $400 from outside suppliers). The fabric plant and the furniture plant both have excess capacity. Assume that Job A500 is a special order. The fabric and furniture plants have sufficient excess capacity to satisfy the demands of Job A500. What is the minimum transfer price for a bolt of FB70? If the maximum transfer price is $400, by how much do the fabric plant's prof- its increase if the two profit centers negotiate a transfer price that splits the joint benefit