21 May WHAT IS THE VALUE OF WORK-IN-PROCESS INVENTORY ON NOVEMBER 30?
Question 1: Old Tyme Soda produces one flavor of a popular local soft drink. It had no work in process on October 31 in its only inventory account. During November, Old Tyme started 11,700 barrels. Work in process on November 30 is 2,050 barrels. The production supervisor estimates that the ending work-in-process inventory is 40 percent complete. An examination of Old Tyme’s accounting records shows direct material costs of $25,544 and conversion costs of $28,900 for November. All production is sold as it is produced.
Required:
(a) Compute cost of goods sold for November.
(b)
What is the value of work-in-process inventory on November 30?
(c) The president tells the controller that stock analysts expect higher income for the month and asks the controller to change the production manager’s estimate about the ending work-in-process inventory.
(1)
In order to generate higher income, would the controller raise or lower the estimated percentage of completion on the ending work-in-process inventory?
(2)
What should the controller do?
Quesion number 2:
Vermont Instruments manufactures two models of calculators. The finance model is the Fin-X and the scientific model is the Sci-X. Both models are assembled in the same plant and require the same assembling operations. The difference between the models is in the cost of the parts. The following data are available for June.
Fin-X Sci-X Total
Number of units 14,000 40,000 54,000
Parts cost per unit $ 22 $ 23
Other costs:
Direct labor $ 52,000
Indirect materials 19,800
Overhead 36,200
Total $ 108,000
Required:
Vermont Instruments uses operations costing and assigns conversion costs based on the number of units assembled. Compute the cost per unit of the Fin-X and Sci-X models for June.
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