I just need to check my answers for a specific problem, my teacher has provided
ID: 2450150 • Letter: I
Question
I just need to check my answers for a specific problem, my teacher has provided us a diffrent end result:
Four the past four years, three companies have dominated the soft drink industry, holding a combined 85 percent of market share. Wonder Cola Inc., ranks second nationally in soft drinks sales. Its management is thinking about introducing a new low-caloric drink called Null Cola. Wonder soft drinks are processed in a single department. All ingredients are added at the beginning of the process. At the end of the process, the beverage is poured into bottles that cost $0.24 per case produced. Direct labor and overhead cost are applied uniformly throughout the process. Corporate controller Adam Daneen believes that costs foe the cola will be very much like those for the company's Cola Plus drink. Last year, he collected the following data about Cola Plus:
Units* Costs
Work in process inventory
January 1 (!)------------------------- 2,200
Direct material costs--------------------------------------- $ 2,080
Concersion Costs------------------------------------------ 620
December 31 (!!) ---------------------- 2,000
Direct material costs--------------------------------------- 1,880
Conversion costs------------------------------------------ 600
Units started during year 458,500
Costs for year
Liquid material added-------------------------------------- 430,990
Direct labor and overhead--------------------------------- 229,400
Bottles--------------------------------------------------- 110,068
Each unit is a 24-bottle case.
(!)50% complete = January
(!!)60%complete = December
The company's variable general administration and selling costs are $1.10 per unit. Fixed administration and selling costs are assigned to products at the rate of $0.50 per unit. Each of Wonder Cola's two main competitors is already marketing a diet cola. Company A's product sells for $4.10 per unit; Company B's, for $4.05. All costs are expected to increase by 10 percent in the next three years. Wonder Cola tries to earn a profit of at least 15 percent on the total unit cost.
Here is what I came up with:
2a and b. Equivalent units for direct materials, cases of bottles, and conversion costs; total production cost per unit computed Won Cola, Inc. Process Cost Report—FIFO Costing Method For the Year Ended December 31, 20xx Physical Units Beginning inventory 2,200 Equivalent Units Units started this period — Direct Cases of Conversion Units to be accounted for 2,200 Materials Bottles Costs Beginning inventory 2,200 2,200 10% 220 10% 220 10% Units started and completed 456,500 45,650 10% 45,650 10% 45,650 10% Ending inventory 2,000 200 10% 200 10% 200 10% Units accounted for 460,700 48,050 46,070 46,070 Total Direct Cases of Conversion Costs Materials Bottles Costs Beginning inventory $ 2,872 = $ 2,058 + $ 264 + $ 550 Current costs 2,759 = 1,871 + 288 + 600 Total costs $5,631 Current Costs $1,871 $288 $600 Equivalent Units 48,050 46,070 46,070 Cost per equivalent unit $0.06 = $0.04 + $0.01 + $0.01 *A unit is a 24-bottle case. **Rounded. Chapter 3, C 4. (Continued) 2c. Total product unit cost Production cost per unit $1.68 Variable administrative and selling costs per unit 1.10 Fixed administrative and selling costs per unit 0.50 Total product unit cost $3.28 3. Expected product unit cost computed $3.28 x 1.10 = $3.61 * 4. Unit selling price range recommended Product unit cost $3.61 Profit factor ( 15% of total cost ) 0.54 Total $4.15 Company A's price $ — Company B's price $ — Managerial Analysis *Rounded.Explanation / Answer
Equivalent units Materaials Bottles conversion
Beginning 2200 2200 - 1100(50%)
Transfered456,500 456,500 456,500 456,500(100%)
Ending 2,000 2,000 - 1,200(60%)
equivalent units 460,700 456,500 458,800
Cost
Beginning $2080 $620
Added 430,990 110,068 229,400
Total 433,070 110,068 230,020
Cost per unit .94 .24 .50
Direct materials = .94
Conversion cost = .50
Bottles = .24
Variable = 1.10
Fixed = .50
Total = $3.28
Selling price = $3.28 @110% = $3.772