Reference no: EM131504507

QUESTION #1

Clear View is a manufacturer of custom windows and uses a job-costing system at its Orlando, FL plant. The plant has a machining department and a finishing department. Clear View uses normal costing with two direct-cost categories (direct materials and direct manufacturing labor) and two manufacturing overhead cost pools (the machining department with machine-hours as the allocation base and the finishing department with direct manufacturing labor costs as the allocation base). The 2014 budget for the plant is as follows:

	Machining Department	Finishing Department
Manufacturing overhead costs	$9,065,000	$8,181,000
Direct manufacturing labor costs	$ 970,000	$4,050,000
Direct manufacturing labor-hours	36,000	155,000
Machine-hours	185,000	37,000

1. Prepare an overview diagram of Clear View's job-costing system.

2. What is the budgeted manufacturing overhead rate in the machining department? In the finishing department?

3. During the month of January, the job-cost record for Job 431 shows the following:

	Machining Department	Finishing Department
Direct materials used	$13,000	$ 5,000
Direct manufacturing labor costs	$ 900	$ 1,250
Direct manufacturing labor-hours	20	70
Machine-hours	140	20

Compute the total manufacturing overhead cost allocated to Job 431.
4. Assuming that Job 431 consisted of 300 units of product, what is the cost per unit?
5. Amounts at the end of 2014 are as follows:

	Machining Department	Finishing Department
Manufacturing overhead incurred	$10,000,000	$7,982,000
Direct manufacturing labor costs	$ 1,030,000	$4,100,000
Machine-hours	200,000	34,000

Compute the under- or overallocated manufacturing overhead for each department and for the Dover plant as a whole.

6. Why might Clear View use two different manufacturing overhead cost pools in its job-costing system?

QUESTION #2

Because of the availability of equipment and labor, Clear View has started making mass market picture frames at its Orlando, Florida plant with the excess capacity. Clear View has determined that process costing would be most appropriate for this product. Management wants to know the differences between using the Weighted Average and FIFO methods

Every picture frame passes through two departments: the assembly department and the finishing department. This problem focuses on the assembly department. The process-costing system at Clear View has a single direct-cost category (direct materials) and a single indirect-cost category (conversion costs). Direct materials are added when the assembly department process is 10% complete. Conversion costs are added evenly during the assembly department's process.

Consider the following data for the assembly department in April 2014:

	Physical Unit (Frames)	Direct Materials	Conversion Costs
Work in process, April la	60	S         1,530	S              155
Started during April 2014	510
Completed during April 2014	450
Work in process, April 30°	120
Total costs added during April 2014		S17,850	511.544

a. Degree of completion: direct materials, 100%; conversion costs, 40%.
b. Degree of completion: direct materials, 100%; conversion costs, 15%.

1. Summarize the total assembly department costs for April 2014, and assign them to units completed (and transferred out) and to units in ending work in process using the weighted average method.

2. What issues should a manager focus on when reviewing the equivalent units calculation?

3. Summarize the total assembly department costs for April 2014, and assign them to units completed (and transferred out) and to units in ending work in process using the FIFO method.

4. Explain any difference between the cost of work completed and transferred out and the cost of ending work in process in the assembly department under the weighted-average method and the FIFO method. Should Clear View's managers choose the weighted-average method or the FIFO method? Explain briefly.

QUESTION #3

Clear's Custom Window division has been purchasing a certain window components from Duwee, Cheatim& How Company. However it was determined that it can use one of the frames from the Framing division. The Framing Division, which is operating at capacity, incurs an incremental manufacturing cost of $65 per frame. The Picture Framing Division can sell all its output to the outside market at a price of $100 per frame, after incurring a variable marketing and distribution cost of $8 per frame. If the Window division purchases frames from Duwee at a price of $100 per frame, it will incur a variable purchasing cost of $7 per frame. Clear View's division managers can act autonomously to maximize their own division's operating income.

1. What is the minimum transfer price at which the Frame manager would be willing to sell frames to the Window Division?

2. What is the maximum transfer price at which the Window manager would be willing to purchase frames from the Framing Division?

3. Now suppose that the Framing Division can sell only 70% of its output capacity of 20,000 frames per month on the open market. Capacity cannot be reduced in the short run. The Windows Division can assemble and sell more than 20,000 windows per month.

a. What is the minimum transfer price at which the Framing manager would be willing to sell frames to the Windows Division?

b. From the point of view of Clear View's management, how much of the Framing Division's output should be transferred to the Window Division?

c. If Clear View mandates the Framing and Windows managers to "split the difference" on the minimum and maximum transfer prices they would be willing to negotiate over, what would be the resulting transfer price? Does this price achieve the outcome desired in requirement 3b?

Attachment:- Cost accounting template.rar