Suppose the Atlas Manufacturing Limited production costs incurred to make 10,000 suits and the costs per suit are as follows: Total Cost Cost Per Suit Production Dept 1,200,000 1,200,000/ 10,000= 120 Packaging Dept 450,000 450,000/10,000=45 Total Direct Cost 1,650,000 1,650,000/ 10,000=165 Manufacturing Overhead The opening inventories for the period was 0 units and WIP of 500 units and the closing inventories for the period were 3500 units of raw materials and 4000 units of WIP. Raw materials bought during the period were for 45,000 units. Finished goods are transferred to the Packaging Dept. The Direct Labour Cost was $50 per unit while Direct Material were $40.00 per unit and direct expense was ___ per unit. 120-(50+40)=30 DE The Indirect Labour Cost was $20.00 per unit while indirect material was $15 per unit while manufacturing overhead was ____ per unit. 45-(20+15)=10 The inventories in the production dept consisted of WIP with all raw material 100% completed while 20% completed for conversion costs. The inventories in the Packaging dept were as follows: Raw material = Beginning inventory = 0 units, ending raw material inventory = 3,000 units WIP beginning = 0 units, ending WIP = 6,000 units. Production dept cost = direct labour = 50 + 30= $80 Conversion cost = 100% - 20%= 80%(80 * 500 units)= 32,000 Finish good = 45,000 units WIP= 500 units # of units start and complete in the period = 45,000-500= 44,500 units 44,500units (3,500+4,000)= 37,000 units 37,000*120= 4,440,000 units Total cost of finish good during the period= 500units of WIP + 44,500 units = 45,000 Units = 32,000 + 4,440,000 units= 4,480,000 Beginning WIP in units WIP= 4000 units = 100% raw material + 20% conversion cost ($40*4000 units) +(0.2* 80 * 4000) 160,000 + 64,000= 224,000 Total cost incurred in production department =finish good + WIP = 224,000 + 4,480,000= 4,704,000 WIP = 224,000*(500units) Finish Goods= 4,480,000 (37,000 units) Total units transferred for the period to department 2 (packaging department) = 37,500 units Total cost finished and transferred for the period to department 2 (packaging department) 32,000 suits * 120 per suit = $3,840,000 500 suits * 120 per suits = $60,000 Total direct of finish goods transferred to packaging department = $3,840,000+ $60,000= 3,900,000 Beginning WIP in Cost Direct material = 100%=500* 40 Conversion cost 20%= 500 * 80 Direct material added cost 37,000 + 4000 = 41,000 Direct labor = 50*500*80%+4000*50*20% + 37,000*50=1,910,000 Manufacturing overhead= 500*10*80%+37,000*10+4,000*10*20%=382,000 Required 1. Calculate the missing costs in both per unit and actual $ value. 2. Complete the Production Cost Report. Production Cost Report Units Department Units to account for: Beginning WIP 500 Start in production 41,000 Complete and transferred out 37,500 Ending WIP 4,000 Units Percent complete % Direct material 100 Conversion cost 20 Cost Beginning WIP: Direct Material cost 20,000 Conversion cost 8,000 Direct Material added 1,640,000 Conversion cost added Direct labour 1,910,000 Manufacturing overhead allocated 382,000 Total conversion cost 2,292,000 In addition to the figures that above, the company estimates that sales would grow by 20% for the following month, by 10% the next month and 5% the 3rd month. If it wants to part take of the expected increase in the sales it anticipates that it has to do the following: 1. Increase labour by either using additional labour cost of 5% higher than the current level or use overtime at 1.5 times the current labour cost. 2. Raw material cost will reduce by 2% per unit because of the expected increase in volume to be purchased. 3. There will be additional rental space of $30,000 per month for the 3 months and selling & administrative expenses will increase by 15,000 per month for the next 3 months. 4. Although item 3 above is expected the manager is uncertain so he decided to use the allocation method to allocate the manufacturing overhead costs. This he assumes to be 50% of the existing labour cost. 5. The company has a policy of selling its suits at 50% on Cost of Goods Sold. This profit is used to cover fixed administrative costs Required: 1. Advise the manager of what the expectations of the proposed will be for the company. 2. Calculate the figures using the actual expected MOH and advise the manager if his decision to use the allocation method is a good decision