Samantha is compiling the key processes of the factory where she works. Her focus on been on the key processes of the conversion work. All units require cutting and assembly, but not all units require quality control. Since the company is set up to create their products in batches while using the benefits of process costing, they have implemented an operation costing system. Samantha has collected the following budgeted costs and production volumes for the current year:
The company recently completed a batch of 1,280 units where first half required cutting, assembly, and quality control, and the second half only required cutting and assembly. The total Direct Materials (DM) associated with either type of these units is $4.89 per unit, and each unit has a selling price of $19.75 per unit. What is the gross profit percentage per unit for each half of this batch? (Round calculations to two decimal places.)

Question

Samantha is compiling the key processes of the factory where she works. Her focus on been on the key processes of the conversion work. All units require cutting and assembly, but not all units require quality control. Since the company is set up to create their products in batches while using the benefits of process costing, they have implemented an operation costing system. Samantha has collected the following budgeted costs and production volumes for the current year:
 The company recently completed a batch of 1,280 units where first half required cutting, assembly, and quality control, and the second half only required cutting and assembly. The total Direct Materials (DM) associated with either type of these units is $4.89 per unit, and each unit has a selling price of $19.75 per unit. What is the gross profit percentage per unit for each half of this batch? (Round calculations to two decimal places.)

Quizplus · Accepted Answer

This question requires familiarity with calculating Conversion Costs (CC) using an operation costing system. The first step entails calculating a per-unit budgeted cost for each key process. Cutting: $198,500/70,000 = $2.84 per unit, Assembly: $76,400/70,000 = $1.09 per unit, and Quality Control: $49,006/36,000 = $1.36 per unit. The first half of the batch needs all three processes, and the second half only needs cutting and assembly. 1^st half: $2.84 + $1.09 + $1.36 + $4.89 = $10.18. Now, subtract from sales price to arrive at the gross profit: $19.75 - $10.18 = $9.57. Next, divide the gross profit by sales to arrive at the gross profit percentage: $9.57/$19.75 = 48.46%. 2nd half: $2.84 + $1.09 + $4.89 = $8.82. Now, subtract from sales price to arrive at the gross profit: $19.75 - $8.82 = $10.93. Lastly, divide the gross profit by sales to arrive at the gross profit percentage: $10.93/$19.75 = 55.34%.

Samantha Is Compiling the Key Processes of the Factory Where