Question

1. Assembly department of Zahra Technologies had 200 units as work in process at the beginning of the month. These units were​ 45% complete. It has 300 units which are​ 35% complete at the end of the month. During the​ month, it completed and transferred 500 units. Direct materials are added at the beginning of production. Conversion costs are allocated evenly throughout production. Zahra uses​ weighted-average process-costing method. Calculate the total equivalent units in ending inventory for assignment of conversion​ costs?

A. 300 units

B.195 units

C.200 units

D.105 units

2. LaCrosse Products has a budget of​ $900,000 in 2017 for prevention costs. If it decides to automate a portion of its prevention​ activities, it will save​ $81,000 in variable costs. The new method will require​ $41,000 in training costs and​ $109,000 in annual equipment costs. Management is willing to adjust the budget for an amount up to the cost of the new equipment. The budgeted production level is​ 155,000 units.

Appraisal costs for the year are budgeted at​ $600,000. The new prevention procedures will save appraisal costs of​ $50,200. Internal failure costs average​ $18 per failed unit of finished goods. The internal failure rate is expected to be​ 2% of all completed items. The proposed changes will cut the internal failure rate by​ one-third. Internal failure units are destroyed. External failure costs average​ $50 per failed unit. The​ company's average external failures average​ 2% of units sold. The new proposal will reduce this rate by​ 45%. Assume all units produced are sold and there are no ending inventories.

What is the net change in the budget for prevention costs if the procedures are automated in​ 2017? Will management agree with the​ changes?

A.​$150,000 increase, no

B.​$69,000 decrease, yes

C.​$81,000 decrease, yes

D.​$69,000 increase, yes

3 Bismite Corporation purchases trees from Cheney lumber and processes them up to the​ split-off point where two products​ (paper and pencil​ casings) emerge. The products are then sold to an independent company that markets and distributes them to retail outlets. The following information was collected for the month of​October:

Trees processed​:	350	trees
Production​:	paper	​150,000	sheets
	pencil casings	​150,000
Sales​:	paper	​144,000	at​ $0.10 per page
	pencil casings	​147,000	at​ $0.15 per casing

The cost of purchasing 350 trees and processing them up to the​ split-off point to yield​ 150,000 sheets of paper and​ 150,000 pencil casings is​ $15,500.

​Bismite's accounting department reported no beginning inventory.

If the sales value at​ split-off method is​ used, what is the approximate production cost for each paper​ sheet? (Round intermediary percentages to the nearest​hundredth.)

A.​$0.062

B.​$0.043

C.​$0.041

D.​$0.065

Answer 1

1. D 105 Units

Equivalent units in ending inventory = 300 units × 35% = 105 units

2. D $69,000 Increase

Explanation:

New costs:                                       Training                $41,000

                                             New equipment                 109,000              $150,000

Savings

     Variable costs                                                                                          (81,000)

Net increase in budget                                                                             $69,000

3. C $0.041

Paper: 150,000 sheets × $$0.10 = $15,000

Pencils: 150,000 casings × $0.15 = $22,500

Production cost of each paper sheet = [($15,000 / ($15,000 + $22,500) × $15,500)] / 150,000 = $0.0413 (round to $0.041)