Question

Step 5: Assign Total Costs to Units Completed and to units in Ending Work in Process inventory

How much of the Shaping Departments $208,000 total costs should be assigned to
1) the 40,000 completely shaped masks transferred out tot the insertion department and
2) the 10,000 partially shaped masks remaining in the shaping departments ending work process inventory

Answer 1

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

Step-by-step explanation:

To determine the best production method when hiring labor costs $100/unit and capital costs $400/unit, we must calculate the total cost for each method:

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

Using these calculations, we can see the Method 1 is the most cost-efficient.

If the cost of labor increases to $200/unit, we need to recalculate:

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

With the increased cost of labor, Method 1 remains the most cost-effective.