Reference no: EM132954710

Pasado Leather Company manufactures high-quality leather goods. The company's profits have declined during the past nine months. In an attempt to isolate the causes of poor profit performance, management is investigating the manufacturing operations of each of its products.

One of the company's main products is leather belts. The belts are produced in a single, continuous process in the Marikina Plant. During the process, leather strips are sewn, punched, and dyed. The belts then enter a final finishing stage to conclude the process. Labor and overhead are applied continuously during the manufacturing process. All materials, leather strips, and buckles are introduced at the beginning of the process. The firm uses the weighted-average method to calculate its unit costs.

The leather belts produced at the Marikina Plant are sold wholesale for P9.95 each. Management wants to compare the current manufacturing costs per unit with the market prices for leather belts. Top management has asked the plant controller to submit data on the cost of manufacturing the leather belts for the month of October. These cost data will be used to determine whether modifications in the production process should be initiated or whether an increase in the selling price of the belts is justified. The cost per belt used for planning and control is P5.35.

The work-in-process inventory consisted of 400 partially completed units on October 1. The belts were 25 percent complete as to conversion. The costs included in the inventory on October 1 were as follows:

Leather strips. P 990
Buckles 260
Conversion costs 300
Total P 1550

During October 7,600 leather strips were placed into production. A total of 7,000 leather belts were completed. The work-in-process inventory on October 31 consisted of 1,000 belts, which were 50 percent complete as to conversion.

The costs charged to production during October were as follows:

Leather strips P19900
Buckles 5250
Conversion costs 19900
Total P45850

Required:

Problem 1: In order to provide cost data regarding the manufacture of leather belts in the Marikina Plant to the top management of Pasado Leather Company, compute the following amounts for the month of October.

1. The equivalent units for material and conversion.

2. The cost per equivalent unit of material and conversion.

3. The assignment of production costs to the October 31 work-in-process inventory and to goods transferred out.

4. The weighted-average unit cost of leather belts completed and transferred to finished goods.