Question

Use this information about department s to answer the question that follows. department s had no work in process at the beginning of the period. it added 11,600 units of direct materials during the period at a cost of $92,800. during the period, 8,700 units were completed, and 2,900 units were 20% completed as to labor and overhead at the end of the period. all materials are added at the beginning of the process. direct labor was $68,672, and factory overhead was $27,840. the total cost of units completed during the period was

1) $133,980
2) $69,600
3) $160,080
4) $192,096

Answer 1

The most cost-effective production method with labor at $100/unit and capital at $400/unit is Method 1 with a total cost of $9,000. If the cost of labor increases to $200/unit, Method 1 remains the most cost-effective at $14,000.

Step-by-step explanation:

The subject question involves the analysis of production methods considering the costs of labor and capital. It requires the calculation of the total cost for each method to determine the most cost-effective production method, both with the current cost of labor and with the increased cost scenario. To calculate the total cost for each method, multiply the units of labor by the given cost per unit of labor and add the product of the units of capital by the cost per unit of capital.

Let's calculate the costs for each method with labor costing $100/unit and capital costing $400/unit:

• 
  
• Method 1: (50 units of labor × $100) + (10 units of capital × $400) = $5,000 + $4,000 = $9,000
• 
  
• Method 2: (20 units of labor × $100) + (40 units of capital × $400) = $2,000 + $16,000 = $18,000
• 
  
• Method 3: (10 units of labor × $100) + (70 units of capital × $400) = $1,000 + $28,000 = $29,000

With an increase in the cost of labor to $200/unit, let's calculate again:

• 
  
• Method 1: (50 units of labor × $200) + (10 units of capital × $400) = $10,000 + $4,000 = $14,000
• 
  
• Method 2: (20 units of labor × $200) + (40 units of capital × $400) = $4,000 + $16,000 = $20,000
• 
  
• Method 3: (10 units of labor × $200) + (70 units of capital × $400) = $2,000 + $28,000 = $30,000

The best production method with the initial costs of labor and capital is Method 1, and even when the cost of labor increases, Method 1 remains the most cost-effective option.