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Current Attempt in Progress Khan Products Company uses a job order cost system. For a number of months, there has been an ongoing rift between the sales department and the production department concerning a special-order product, TC-1. TC-1 is a seasonal product that is manufactured in batches of 1,000 units. TC-1 is sold at cost plus a markup of 40% of cost. The sales department is unhappy because fluctuating unit production costs significantly affect selling prices. Sales personnel complain that this has caused excessive customer complaints and the loss of considerable orders for TC-1. The production department maintains that each job order must be fully costed on the basis of the costs incurred during the period in which the goods are produced. Production personnel maintain that the only real solution is for the sales department to increase sales in the slack periods. Andrea Parley, president of the company, asks you as the company accountant to collect quarterly data for the past year on TC-1. From the cost accounting system, you accumulate the following production quantity and cost data. Costs Direct materials Direct labor Manufacturing overhead Total Production in batches Unit cost (per batch) 1 $96,000 36,000 100,000 $232,000 Quarter 2 3 $336,000 $72,000 126,000 27,000 141,860 87,000 $603,860 $186,000 14 3 $58,000 $43,133 $62,000 $336,000 126,000 126,000 $588,000 14 $42,000

Current Attempt in Progress Khan Products Company uses a job order cost system. For a number of months, there has been an ongoing rift between the sales department and the production department concerning a special-order product, TC-1. TC-1 is a seasonal product that is manufactured in batches of 1,000 units. TC-1 is sold at cost plus a markup of 40% of cost. The sales department is unhappy because fluctuating unit production costs significantly affect selling prices. Sales personnel complain that this has caused excessive customer complaints and the loss of considerable orders for TC-1. The production department maintains that each job order must be fully costed on the basis of the costs incurred during the period in which the goods are produced. Production personnel maintain that the only real solution is for the sales department to increase sales in the slack periods. Andrea Parley, president of the company, asks you as the company accountant to collect quarterly data for the past year on TC-1. From the cost accounting system, you accumulate the following production quantity and cost data. Costs Direct materials Direct labor Manufacturing overhead Total Production in batches Unit cost (per batch) 1 $96,000 36,000 100,000 $232,000 Quarter 2 3 $336,000 $72,000 126,000 27,000 141,860 87,000 $603,860 $186,000 14 3 $58,000 $43,133 $62,000 $336,000 126,000 126,000 $588,000 14 $42,000

Financial And Managerial Accounting
Financial And Managerial Accounting
15th Edition
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:WARREN, Carl S.
Chapter18: Activity-based Costing
Section: Chapter Questions
Problem 13E: Handbrain Inc. is considering a change to activity-based product costing. The company produces two...
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Current Attempt in Progress Khan Products Company uses a job order cost system. For a number of months, there has been an ongoing rift between the sales department and the production department concerning a special-order product, TC-1. TC-1 is a seasonal product that is manufactured in batches of 1,000 units. TC-1 is sold at cost plus a markup of 40% of cost. The sales department is unhappy because fluctuating unit production costs significantly affect selling prices. Sales personnel complain that this has caused excessive customer complaints and the loss of considerable orders for TC-1. The production department maintains that each job order must be fully costed on the basis of the costs incurred during the period in which the goods are produced. Production personnel maintain that the only real solution is for the sales department to increase sales in the slack periods. Andrea Parley, president of the company, asks you as the company accountant to collect quarterly data for the past year on TC-1. From the cost accounting system, you accumulate the following production quantity and cost data. Costs Direct materials Direct labor Manufacturing overhead Total Production in batches Unit cost (per batch) (c) Costs Direct materials Direct labor Total Production in batches Unit cost (per batch) 1 $96,000 36,000 Manufacturing overhead Applied Save for Later 100,000 $232,000 4 2 $ Quarter $ $336,000 126,000 $58,000 $43,133 Restate the quarterly data by applying overhead as a set rate per batch. 14 3 141,860 $603,860 $186,000 $72,000 1 27,000 87,000 3 $62,000 $ $ $336,000 126,000 126,000 $588,000 14 $42,000 2 Quarter $ $ 3 Attempts: 0 of 1 used Submit Answer
Transcribed Image Text:Current Attempt in Progress Khan Products Company uses a job order cost system. For a number of months, there has been an ongoing rift between the sales department and the production department concerning a special-order product, TC-1. TC-1 is a seasonal product that is manufactured in batches of 1,000 units. TC-1 is sold at cost plus a markup of 40% of cost. The sales department is unhappy because fluctuating unit production costs significantly affect selling prices. Sales personnel complain that this has caused excessive customer complaints and the loss of considerable orders for TC-1. The production department maintains that each job order must be fully costed on the basis of the costs incurred during the period in which the goods are produced. Production personnel maintain that the only real solution is for the sales department to increase sales in the slack periods. Andrea Parley, president of the company, asks you as the company accountant to collect quarterly data for the past year on TC-1. From the cost accounting system, you accumulate the following production quantity and cost data. Costs Direct materials Direct labor Manufacturing overhead Total Production in batches Unit cost (per batch) (c) Costs Direct materials Direct labor Total Production in batches Unit cost (per batch) 1 $96,000 36,000 Manufacturing overhead Applied Save for Later 100,000 $232,000 4 2 $ Quarter $ $336,000 126,000 $58,000 $43,133 Restate the quarterly data by applying overhead as a set rate per batch. 14 3 141,860 $603,860 $186,000 $72,000 1 27,000 87,000 3 $62,000 $ $ $336,000 126,000 126,000 $588,000 14 $42,000 2 Quarter $ $ 3 Attempts: 0 of 1 used Submit Answer
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