Question

Weighted Average Method, FIFO Method, Physical Flow, Equivalent Units Heap Company manufactures a product that passes through two processes: Fabrication and Assembly. The following information was obtained for the Fabrication Department for September: All materials are added at the beginning of the process. Beginning work in process had 86,300 units, 30 percent complete with respect to conversion costs. Ending work in process had 19,300 units, 40 percent complete with respect to conversion costs. Started in process, 105,900 units. Required: 1. Prepare a physical flow schedule.

Answer 1

The best production method when labor costs $100/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 with a total cost of $14,000.

Step-by-step explanation:

To determine the best production method based on the costs provided, we need to calculate the total cost for each method using the cost per unit of labor ($100/unit for the winter scenario and $200/unit for the increased labor cost scenario) and the cost per unit of capital ($400/unit).

For the initial scenario with labor costing $100/unit:

Method 1: (50 units of labor x $100) + (10 units of capital x $400) = $5,000 + $4,000 = $9,000

Method 2: (20 units of labor x $100) + (40 units of capital x $400) = $2,000 + $16,000 = $18,000

Method 3: (10 units of labor x $100) + (70 units of capital x $400) = $1,000 + $28,000 = $29,000

For the scenario where the cost of labor rises to $200/unit:

Method 1: (50 units of labor x $200) + (10 units of capital x $400) = $10,000 + $4,000 = $14,000

Method 2: (20 units of labor x $200) + (40 units of capital x $400) = $4,000 + $16,000 = $20,000

Method 3: (10 units of labor x $200) + (70 units of capital x $400) = $2,000 + $28,000 = $30,000

The best production method when labor is $100/unit is Method 1, with the lowest total cost of $9,000. If the cost of labor rises to $200/unit, Method 1 still remains the most cost-effective with a total cost of $14,000.

Answer 2

Physical flow schedule

Inputs

Beginning Work in Process 86,300

Add Units Started 105,900

Total 192,200

Outputs

Units Completed and Transferred 172,900

Units in Ending Work in Process 19,300

Total 192,200

Step-by-step explanation:

A physical flow schedule is simply a schedule of units introduced into the process and units outputs without expressing them to equivalent units.

Units Introduced must always be equal to units outputs in physicals terms.

Units Completed and Transferred = Beginning Inventory + Units Started - Units in Ending Work in Process

= 86,300 + 105,900 - 19,300

= 172,900