Question

The Work in Process Inventory at the end of the year has 2 Jobs - #3A and #3B, both consisting of bird houses with very similar features. The Price-per-Unit of #3A is $5.6.

Fill in the blanks:
The Work in Process Inventory for Job #3A is $___________.
The Work in Process Inventory for Job #3B is $___________.

Answer 1

The best production method is determined by calculating the total cost for each method. Method 1 has the lowest total cost and should be used. If the cost of labor rises, Method 1 would still have the lowest total cost.

Step-by-step explanation:

The best production method can be determined by calculating the total cost for each method. Let's calculate it for each method:

Method 1: 50 units of labor x $100/unit + 10 units of capital x $400/unit = $5000 + $4000 = $9000

Method 2: 20 units of labor x $100/unit + 40 units of capital x $400/unit = $2000 + $16000 = $18000

Method 3: 10 units of labor x $100/unit + 70 units of capital x $400/unit = $1000 + $28000 = $29000

Based on the calculations, Method 1 has the lowest total cost and should be used. If the cost of labor rises to $200/unit, the calculations would change as follows:

Method 1: 50 units of labor x $200/unit + 10 units of capital x $400/unit = $10000 + $4000 = $14000

Method 2: 20 units of labor x $200/unit + 40 units of capital x $400/unit = $4000 + $16000 = $20000

Method 3: 10 units of labor x $200/unit + 70 units of capital x $400/unit = $2000 + $28000 = $30000

Again, Method 1 would still have the lowest total cost and should be used.