ECON 261 Lecture Notes - Lecture 25: Lead Time
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*problem: a part is produced in lots of 1,000 units. It is assembled from 2 components worth total. The value added in production (for labor and variable overhead) is per unit, bringing total costs per completed unit to . What is the dollar value of this inventory? (hint: assume that the typical part in pipeline inventory is 50 percent completed. Thus, half the labor and variable overhead cost has been added, bringing the unit cost to , or + 2+ 2). *solution: cycle inventory in unit: this is the average of maximum inventory and minimum inventory of a particular lot size in a specific interval. Cycle inventory is the varying portion within the total inventory. Since the maximum and minimum inventory is not given in the sum the total lot-size of 1,000 units should be considered as quantity". Cycle inventory in value: this is the presentation of cycle inventory in monetary term.
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Related Questions
Use the following information on a hypothetical short-run production function to answer questions A-C.
The price of labor is $20 per day.
Ten units of capital are used each day, regardless of output level.
The price of capital is $50 per unit.
(A). Calculate the marginal product (MP) and average variable product (AP) of each unit of labor input.
(B). Calculate total (TC), average total (ATC), average variable (AVC), and marginal costs (MC).
(C). Can you tell where diminishing marginal returns sets in?
| Labor (L) | Output (Q) | MP | AP | TC | ATC | AVC | MC |
| 5 | 120 | -- | -- | ||||
| 6 | 140 | ||||||
| 7 | 155 | ||||||
| 8 | 165 | ||||||
| 9 | 168 |
| P23-6B Journalize and post standard cost entries, and prepare income statement | |||||||||
| Frio Company uses standard costs with its job order cost accounting system. | |||||||||
| In January, an order (Job No. 84) was received for 5,500 units of Product D . The standard | |||||||||
| cost of one unit of Product D is as follows. | |||||||||
| Direct materials | 1.5 pounds at $4.00 per pound | $6.00 | |||||||
| Direct labor | 1 hour at $9.00 per hour | 9.00 | |||||||
| Overhead | 1 hour (variable $7.40; fixed $8.00 | 15.40 | |||||||
| Standard cost per unit | $30.40 | ||||||||
| Overhead is applied on the basis of direct labor hours. Normal capacity for the month | |||||||||
| of January was 6,000 direct labor hours. During January, the following transactions | |||||||||
| applicable to Job No, 48 occurred. | |||||||||
| 1. Purchased 8,100 pounds of raw materials on account at $3.70 per pound. | |||||||||
| 2. Requisitioned 8,100 pounds of raw materials for production. | |||||||||
| 3. Incurred 5,200 hours of direct labor at a rate of $9.20 per hour. | |||||||||
| 4. Worked 5,200 hours of direct labor on Job No.84. | |||||||||
| 5. Incurred $87,500 of manufacturing overhead on account. | |||||||||
| 6. Applied overhead to Job No. 84 on basis of direct labor hours. | |||||||||
| 7. Transferred Job NO. 84 to finished goods. | |||||||||
| 8. Billed customer for Job No. 84 at a selling price of $270,000. | |||||||||
| Instructions | |||||||||
| (a) Journalize the transactions. | |||||||||
| (b) Post to the job order cost accounts. | |||||||||
| (c ) Prepare the entry to recognize the total overhead variance. | |||||||||
| (d) Prepare the January 2014 income statement for management. Assume selling and | |||||||||
| administrative expenses were $60,000. | |||||||||
| NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" . | |||||||||
| (a)(1) | Account | Value | |||||||
| Account | Value | ||||||||
| Account | Value | ||||||||
| (a)(2) | Account | Value | |||||||
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| (a)(3) | Account | Value | |||||||
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| (a)(5) | Account | Value | |||||||
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| (a)(6) | Account | Value | |||||||
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| (a)(7) | Account | Value | |||||||
| Account | Value | ||||||||
| (a)(8) | Account | Value | |||||||
| Account | Value | ||||||||
| Account | Value | ||||||||
| Account | Value | ||||||||
| (b) | Raw Materials Inventory | Materials Price Variance | Work in Process Inventory | ||||||
| Value | Value | Value | Value | Value | |||||
| Value | |||||||||
| Value | |||||||||
| Factory Labor | Materials Quantity Variance | Finished Goods Inventory | |||||||
| Value | Value | Value | Value | Value | |||||
| Manufacturing Overhead | Labor Price Variance | Cost of Goods Sold | |||||||
| Value | Value | Value | Value | ||||||
| Labor Quantity Variance | |||||||||
| Value | |||||||||
| (c ) | Account | Value | |||||||
| Account | Value | ||||||||
| (d) | FRIO COMPANY | ||||||||
| Income Statement | |||||||||
| For the Month Ended January 31, 2014 | |||||||||
| Sales revenue | Value | ||||||||
| Cost of goods sold (at standard) | Value | ||||||||
| Gross profit (at standard) | Value | ||||||||
| Variances | |||||||||
| Material price | Value | ||||||||
| Materials quantity | Value | ||||||||
| Labor price | Value | ||||||||
| Labor quantity | Value | ||||||||
| Overhead | Value | ||||||||
| Total variance - favorable | Value | ||||||||
| Gross profit (actual) | Value | ||||||||
| Selling and administrative expenses | Value | ||||||||
| Net income | Value | ||||||||