Lycoming Leather Company
Lycoming Leather Company manufactures leather goods in Central Pennsylvania. The company’s profits have declined during the past nine months. In an attempt to isolate the causes of poor profit performance, management is investigating the manufacturing operations of each of its products.
One of the company’s main products is leather belts. The belts are produced in a single, continuous process in the Harrisburg Plant. During the process, leather strips are sewn, punched, and dyed. The belts then enter a final finishing stage to conclude the process. Labor and overhead are applied continuously during the manufacturing process. All materials, leather strips, and buckles are introduced at the beginning of the process. The firm uses average method to calculate its unit costs.
The leather belts produced at the Harrisburg Plant are sold wholesale for $22.95 each. Management wants to compare the current manufacturing costs per unit with the market prices for leather belts. Top management has asked the plant controller to submit data on the cost of manufacturing the leather belts for the month of October. These cost data will be used to determine whether modifications in the production process should be initiated or whether an increase in the selling price of the belts is justified. The cost per belt used for planning and control is $11.50.
The work in process inventory consisted of 500 partially completed units on October 1. The belts were 30 percent complete as to conversion. The costs included in the inventory on October 1, were as follows:
Leather strips $1,650
Buckles 350
Conversion Costs 2,500
Total $4,500 During October, 8000 leather strips and buckles were placed into production. A total of 8,100 leather belts were completed. The work in process inventory on October 31 consisted of 400 belts, which were 40 percent complete as to conversion. The costs charged to production during October were as follows: Leather strips
One of the company’s main products is leather belts. The belts are produced in a single, continuous process in the Harrisburg Plant. During the process, leather strips are sewn, punched, and dyed. The belts then enter a final finishing stage to conclude the process. Labor and overhead are applied continuously during the manufacturing process. All materials, leather strips, and buckles are introduced at the beginning of the process. The firm uses average method to calculate its unit costs.
The leather belts produced at the Harrisburg Plant are sold wholesale for $22.95 each. Management wants to compare the current manufacturing costs per unit with the market prices for leather belts. Top management has asked the plant controller to submit data on the cost of manufacturing the leather belts for the month of October. These cost data will be used to determine whether modifications in the production process should be initiated or whether an increase in the selling price of the belts is justified. The cost per belt used for planning and control is $11.50.
The work in process inventory consisted of 500 partially completed units on October 1. The belts were 30 percent complete as to conversion. The costs included in the inventory on October 1, were as follows:
Leather strips $1,650
Buckles 350
Conversion Costs 2,500
Total $4,500 During October, 8000 leather strips and buckles were placed into production. A total of 8,100 leather belts were completed. The work in process inventory on October 31 consisted of 400 belts, which were 40 percent complete as to conversion. The costs charged to production during October were as follows: Leather strips