Silicon Optics has supplied the following data for use in its activity-based costing system:

Silicon Optics has supplied the following data for use in its activity-based costing system:

Overhead Costs
Wages and salaries	$	356,000
Other overhead costs		197,000
Total overhead costs	$	553,000

Activity Cost Pool	Activity Measure	Total Activity
Direct labor support	Number of direct labor-hours	14,000	DLHs
Order processing	Number of orders	500	orders
Customer support	Number of customers	95	customers
Other	This is an organization-sustaining activity	Not applicable

	Distribution of Resource Consumption Across Activities
	Direct Labor Support		Order Processing		Customer Support		Other		Total
Wages and salaries	20	%	30	%	15	%	35	%	100	%
Other overhead costs	30	%	15	%	15	%	40	%	100	%

During the year, Silicon Optics completed an order for a special optical switch for a new customer, Indus Telecom. This customer did not order any other products during the year. Data concerning that order follow:

Data Concerning the Indus Telecom Order
Selling price	$	265	per unit
Units ordered		100	units
Direct materials	$	268	per unit
Direct labor-hours		0.4	DLH per unit
Direct labor rate	$	23	per DLH

Required:
1.	Prepare a report showing the first-stage allocations of overhead costs to the activity cost pools. (Omit the "$" sign in your response.)

	Direct Labor Support	Order Processing	Customer Support	Other	Totals
Wages and salaries	$	$	$	$	$
Other overhead costs
Total cost	$	$	$	$	$

2.	Compute the activity rates for the activity cost pools. (Round your answers to 2 decimal places. Omit the "$" sign in your response.)

Activity Cost Pools	Activity Rate
Direct labor support	$	per DLH
Order processing	$	per order
Customer support	$	per customer

3.	Compute the overhead costs for the order from Indus Telecom, including customer support costs. (Round your intermediate calculations and final answers to 2 decimal places. Omit the "$" sign in your response.)

Activity Cost Pool	ABC Cost
Direct labor support	$
Order processing
Customer support
Total	$

4.	Prepare a report showing the customer margin for Indus Telecom. (Input all amounts as positive values except losses which should be indicated by a minus sign. Round your intermediate calculations and final answers to 2 decimal places. Omit the "$" sign in your response.)

Indus Telecom Customer Margin—ABC Analysis
Sales		$
Costs:
Direct materials	$
Direct labor
Direct labor support overhead
Order processing overhead
Customer support overhead
Customer margin		$

Explanation:

1.

First-stage allocations of overhead costs to the activity cost pools:

Wages and salaries:

Direct labor support: $356,000 × 20% =$71,200

Order processing: $356,000 × 30% = $106,800

Customer support: $356,000 × 15% = $53,400

Other: $356,000 × 35% = $124,600

Other overhead costs:

Direct labor support: $197,000 × 30% = $59,100

Order processing: $197,000 × 15% = $29,550

Customer support: $197,000 × 15% = $29,550

Other: $197,000 × $40% = $78,800

2.

Computation of activity rates:

Activity Cost Pool	(a) Total Cost		(b) Total Activity		(a) ÷ (b) Activity Rate
Direct labor support	$	130,300	14,000	DLHs		$ 9.31	per DLH
Order processing	$	136,350	500	orders		$ 272.70	per order
Customer support	$	82,950	95	customers		$ 873.16	per customer

3.

Computation of the overhead costs for the Indus Telecom order:

Activity Cost Pool	(a) Activity Rate			(b) Activity		(a) × (b) ABC Cost
Supporting direct labor	$	9.31	per DLH	40	DLHs*	$	372.40
Order processing	$	272.70	per order	1	order		272.70
Customer support	$	873.16	per customer	1	customer		873.16
Total						$	1,518.26

*0.4 DLH per unit × 100 units = 40 DLHs

4.

Sales (100 units × $265 per unit) = $26,500

Direct materials ($268 per unit × 100 units) = $26,800

Direct labor ($23 per DLH × 0.4 DLH per unit × 100 units) = $920

The PVC Company manufactures a high-quality plastic pipe that goes through three processing stages prior to completion.

The PVC Company manufactures a high-quality plastic pipe that goes through three processing stages prior to completion.

Information on work in the first department, Cooking, is given below for May:

Production data:
Pounds in process, May 1: materials       100% complete; conversion 90% complete		60,000
Pounds started into production during May		250,000
Pounds completed and transferred to       the next department		?
Pounds in process, May 31:       materials 60% complete; conversion 40% complete		20,000
Cost data:
Work in process inventory, May 1:
Materials cost	$	59,000
Conversion cost	$	23,400
Cost added during May:
Materials cost	$	306,420
Conversion cost	$	128,580

The company uses the weighted-average method.

Required:

1.	Compute the equivalent units of production.

	Materials	Conversion
Equivalent units of production

2.	Compute the costs per equivalent unit for the month. (Round your answers to 2 decimal places. Omit the "$" sign in your response.)

	Materials	Conversion
Cost per equivalent unit	$	$

3.	Determine the cost of ending work in process inventory and of the units transferred out to the next department. (Omit the "$" sign in your response.)

	Materials	Conversion	Total
Cost of ending work in process inventory	$	$	$
Cost of units completed and transferred out	$	$	$

4.	Prepare a cost reconciliation report for the month. (Omit the "$" sign in your response.)

Cost Reconciliation
Costs to be accounted for:
Cost of beginning work in process inventory	$
Costs added to production during the period
Total cost to be accounted for	$
Costs accounted for as follows:
Cost of ending work in process inventory	$
Cost of units completed and transferred out
Total cost accounted for	$

Explanation:

Weighted-Average Method

1.

Equivalent units of production

	Materials	Conversion
Transferred to next department*	290,000	290,000
Ending work in process:
Materials: 20,000 units × 60% complete	12,000
Conversion: 20,000 units × 40% complete		8,000
Equivalent units of production	302,000	298,000

*Units transferred to the next department = Units in beginning work in process + Units started into production − Units in ending work in process = 60,000 + 250,000 − 20,000 = 290,000

2.

Cost per equivalent unit

	Materials		Conversion
Cost of beginning work in process	$	59,000	$	23,400
Cost added during the period		306,420		128,580
Total cost (a)	$	365,420	$	151,980
Equivalent units of production (b)		302,000		298,000
Cost per equivalent unit, (a) ÷ (b)	$	1.21	$	0.51

3.

Cost of ending work in process inventory and units transferred out

	Materials		Conversion		Total
Ending work in process inventory:
Equivalent units of production      (materials: 20,000 units × 60% complete;       conversion: 20,000 units × 40% complete)		12,000		8,000
Cost per equivalent unit	$	1.21	$	0.51
Cost of ending work in process inventory	$	14,520	$	4,080	$	18,600
Units completed and transferred out:
Units transferred to the next department		290,000		290,000
Cost per equivalent unit	$	1.21	$	0.51
Cost of units completed and transferred out	$	350,900	$	147,900	$	498,800

4.

Cost of beginning work in process inventory ($59,000 + $23,400) = $82,400

Costs added to production during the period ($306,420 + $128,580) = $435,000

Solex Company produces a high-quality insulation material that passes through two production processes. Data for June for the first process follow:

Solex Company produces a high-quality insulation material that passes through two production processes. Data for June for the first process follow:

	Units	Completion with Respect to Materials			Completion with Respect to Conversion
Work in process inventory, June 1	76,000	75	%		40	%
Work in process inventory, June 30	56,000	50	%		25	%
Materials cost in work in process inventory, June 1				$	60,000
Conversion cost in work in process inventory, June 1				$	17,800
Units started into production					258,000
Units transferred to the next process					278,000
Materials cost added during June				$	408,180
Conversion cost added during June				$	256,680

Required:

1.	Assume that the company uses the weighted-average method of accounting for units and costs. Determine the equivalent units for June for the first process.

	Materials	Conversion
Equivalent units of production

2.	Compute the costs per equivalent unit for June for the first process. (Round your answers to 2 decimal places. Omit the "$" sign in your response.)

	Materials	Conversion
Cost per equivalent unit	$	$

3.	Determine the total cost of ending work in process inventory and the total cost of units transferred to the next process in June. (Omit the "$" sign in your response.)

	Total
Cost of ending work in process inventory	$
Cost of units transferred to the next process	$

Explanation:

Weighted-Average Method
 

1.

	Materials	Conversion
Units transferred to the next process	278,000	278,000
Ending work in process:
Materials: 56,000 units × 50% complete	28,000
Conversion: 56,000 units × 25% complete		14,000
Equivalent units of production	306,000	292,000

2.

	Materials		Conversion
Cost of beginning work in process	$	60,000	$	17,800
Cost added during the period		408,180		256,680
Total cost (a)	$	468,180	$	274,480
Equivalent units of production (b)		306,000		292,000
Cost per equivalent unit (a) ÷ (b)	$	1.53	$	.94

3.

	Materials		Conversion		Total
Ending work in process inventory:
Equivalent units of production		28,000		14,000
Cost per equivalent unit	$	1.53	$	.94
Cost of ending work in process inventory	$	42,840	$	13,160	$	56,000
Units completed and transferred out:
Units transferred to the next process		278,000		278,000
Cost per equivalent unit	$	1.53	$	.94
Cost of units completed and transferred out	$	425,340	$	261,320	$	686,660

 

Kalox, Inc., manufactures an antacid product that passes through two departments. Data for May for the first department follow:

Kalox, Inc., manufactures an antacid product that passes through two departments. Data for May for the first department follow:          

	Gallons	Materials		Labor		Overhead
Work in process, May 1	87,000	$	84,400	$	42,200	$	55,900
Gallons started in process	829,000
Gallons transferred out	850,000
Work in process, May 31	66,000
Cost added during May		$	1,116,480	$	521,025	$	689,290

     

The beginning work in process inventory was 70% complete with respect to materials and 55% complete with respect to labor and overhead. The ending work in process inventory was 50% complete with respect to materials and 25% complete with respect to labor and overhead.

   

Required:

Assume that the company uses the weighted-average method of accounting for units and costs.

   

1.	Compute the equivalent units for May’s activity for the first department.

   

	Materials	Labor	Overhead
Equivalent units of production

   

2.	Determine the costs per equivalent unit for May. (Round your answers to 2 decimal places. Omit the "$" sign in your response.)

     

	Materials	Labor	Overhead
Cost per equivalent unit	$	$	$

Explanation:

1.

	Materials	Labor	Overhead
Units transferred to the next department	850,000	850,000	850,000
Work in process, ending:
Materials: 66,000 units × 50% complete	33,000
Labor and overhead: 66,000 units × 25% complete		16,500	16,500
Equivalent units of production	883,000	866,500	866,500

2.

	Materials		Labor		Overhead
Cost of beginning work in process	$	84,400	$	42,200	$	55,900
Costs added during the period		1,116,480		521,025		689,290
Total cost (a)	$	1,200,880	$	563,225	$	745,190
Equivalent units of production (b)		883,000		866,500		866,500
Cost per equivalent unit (a) ÷ (b)	$	1.36	$	0.65	$	0.86