The Custer Manufacturing Corporation, which uses a job order cost system, produces various plastic parts for the aircraft industry. On October 9, Year 1, production was started on Job No. 487 for 100 front bubbles (windshields) for commercial helicopters. Production of the bubbles begins in the Fabricating Department, where sheets of plastic (purchased as raw material) are melted down and poured into molds. The molds are then placed in a special temperature and humidity room to harden the plastic. The hardened plastic bubbles are then removed from the molds and hand-worked to remove imperfections. After fabrication, the bubbles are transferred to the Testing Department, where each bubble must meet rigid specifications. Bubbles that fail the tests are scrapped, and there is no salvage value. Bubbles passing the tests are transferred to the Assembly Department, where they are inserted into metal frames. The frames, purchased from vendors, require no work prior to installing the bubbles. The assembled unit is then transferred to the Shipping Department for crating and shipment. Crating material is relatively expensive, and most of the work is done by hand. The following information concerning Job No. 487 is available as of December 31, Year 1 (the information is correct as stated):

1. Direct materials charged to the job:

a. One thousand square feet of plastic at $12.75 per square foot was charged to the Fabricating Department. This amount was to meet all plastic material requirements of the job assuming no spoilage.

b. Seventy-four metal frames at $408.52 each were charged to the Assembly Department.

c. Packing material for 40 units at $75 per unit was charged to the Shipping Department.

2. Direct labor charges through December 31 were as follows:

Total

Fabricating Department .............................................. $1,424

Testing Department..................................................... 444

Assembly Department................................................. 612

Shipping Department................................................... 256

Total ............................................................................$2,736

3. There were no differences between actual and applied manufacturing overhead for the year ended December 31, Year 1. Manufacturing overhead is charged to the four production departments by various allocation methods, all of which you approve. Manufacturing overhead charged to the Fabricating Department is allocated to jobs based on heat-room-hours; the other production departments allocate manufacturing overhead to jobs on the basis of direct labor-dollars charged to each job within the department. The following reflects the manufacturing overhead rates for the year ended December 31, Year 1.

Rate per Unit

Fabricating Department................................................. $.45 per heat-room-hour

Testing Department........................................................ .68 per direct labor dollar

Assembly Department.................................................... .38 per direct labor dollar

Shipping Department..................................................... .25 per direct labor dollar

4. Job No. 487 used 855 heat-room-hours during the year ended December 31.

5. Following is the physical inventory for Job No. 487 as of December 31:

Fabricating Department:

a. Fifty square feet of plastic sheet.

b. Four complete bubbles.

c. Eight hardened bubbles, one-fourth complete as to direct labor.

Testing Department:

a. Seven bubbles complete as to testing.

b. Fifteen bubbles that failed testing when two-fifths of testing was complete. No others failed.

Assembly Department:

a. Three complete bubbles and frames.

b. Thirteen frames with no direct labor.

c. Fifteen bubbles and frames, one-third complete as to direct labor.

Shipping Department:

a. Nine complete units; two-thirds complete as to packing material; one-third complete as to direct labor.

b. Ten complete units; 100 percent complete as to packing material; 50 percent complete as to direct labor.

c. One unit complete for shipping was dropped off the loading docks. There is no salvage.

d. Twenty-three units have been shipped prior to December 31.

e. There was no inventory of packing materials in the shipping department at December 31.

6. Following is a schedule of equivalent units in production by department for Job No. 487 as of December 31.

a. What is the dollar amount of work-in-process inventory on December 31, Year 1, for Job No. 487 for each of the four departments: Fabricating, Testing, Assembly, and Shipping? The unused plastic in the Fabricating Department is part of that department's work-in-process inventory on December 31, Year 1.
b. What is the dollar amount of Cost of Goods Sold for the 23 units shipped for Job No. 487?
c. What is the cost of the units spoiled in Job No. 487?
d. Custer's management hopes to keep the cost of units sold under $700 per unit and the cost of spoilage under 10 percent of the cost of goods sold. How well is the companydoing?

Transcribed Image Text:

CUSTER MANUFACTURING CORPORATION Schedule of Equivalent Units in Production for Job No. 487 December 31 Fabricating Department Bubbles (Units) Plastic sq. ft. Materials Labor Overhead Production to date (950) 95 95 Transferred out to other departments.... (83) (83) (83) Balance at December 31... 12 12 Testing Departmemt Bubbles Transferred In Overhead Transferred in from other department. Production to date Transferred out to other Spoilage Balance at December 31 74 74 (61) (61) (61) Assembly Department (Units Transferred In Frames Labor Overhead Transferred in from direct materials.... Transferred in from other departments Production to date Transferred out to other departments.... Balance at December 31 61 51 51 43 18 31 Smipping Department (Units) Transferred In Packing Materia Labor Overhead 40 Transferred in from other Production to date Shipped Spoilage Balance at December 31 43 32 (23) 32 (23) (23) (23) 19 16