Solution manual cost accounting 14e by carter ch10

To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com CHAPTER 10 DISCUSSION QUESTIONS Q10-1.The purpose of a JIT system is to minimize the levels of raw materials and work in process inventory investments, while improving the overall manufacturing process The intent is to pull inventory through the system only as it is required Q10-2.JIT seeks to eliminate all forms of waste, including production losses such as defects Successful reduction of these problems contributes to product quality, and, so, is a part of TQM Q10-3.To avoid inventory buildup, the entire JIT system shuts down whenever defects are found; so to achieve a good rate of flow, the number of defects must be small Q10-4.Theoretically, in an ideal JIT system the EOQ is one; each time more output is needed, one more part or unit is produced Q10-5.Although a zero inventory level is unattainable, JIT stimulates improvement in the environmental conditions that cause inventory buildup, such as long setup times, high setup costs, poor quality, and poorly balanced work loads Q10-6.The relationship between velocity and WIP levels is an inverse relationship; doubling the velocity means halving the WIP level, provided the output rate is held constant This is similar, but not identical, to the relationship expressed in the familiar inventory turnover ratio used in financial statement analysis Q10-7.The strategic advantage of improving velocity throughout the company, from product research and development to shipping, is that the company can then respond faster to any changing customer need or to an opportunity for a new or altered product Q10-8.Reducing the level of WIP also reduces the maximum number of defectives, if the defects are of a kind that will be discovered at the next work station after the units are held waiting between stations If 100 units are waiting between stations, up to 100 defectives might be produced before the problem would be discovered; if 10 units are held waiting, no more than 10 defectives could be produced before the problem would be discovered Q10-9.A blanket purchase order is an agreement between buyer and seller stating the total quantity expected to be needed over a period of three or six months Q10-10.In many JIT work cells, these distinctions— between direct and indirect labor and between producing departments and some service functions—do not exist, because the same workers (the team assigned to the cell) perform all these tasks Q10-11.In backflush costing, the work in process inventory account is not adjusted throughout the period to reflect all the costs of units in process; there are no detailed subsidiary records maintained for work in process; and a single account may be used for both raw materials and work in process Q10-12.In backflush costing, the materials and work in process inventory accounts might be combined into a single account, because materials might be put immediately into production when they are received Q10-13.Postdeduction is the subtraction from the work in process account of some or all elements of the cost of completed work, after the work is completed Q10-14.The periodic inventory method used by many merchandising companies is analogous to backflush costing as used by manufacturers Q10-15.If a backflush costing system expenses all conversion costs to the cost of goods sold account, the correct amount of conversion cost is included in inventory accounts by making an end-of-period adjustment of the inventory accounts’ balances The offsetting entry is an adjustment of the cost of goods sold account The correct amount of conversion cost to be included in each inventory account is estimated when inventories are physically counted 10-1 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com 10-2 Chapter 10 EXERCISES E10-1 The expected annual savings are $40,500, consisting of $18,000 carrying costs savings and $22,500 savings in the cost of defects, calculated as follows: Carrying cost savings = = = = 25% × reduction in average variable cost of WIP 25% × 30% × past average variable cost of WIP 25 × × (10 × 300 × $80) $18,000 Savings in cost of defects = $25 × reduction in number of defective units = $25 × (reduction in number of defective units produced per undiscovered out-of-control condition) = $25 × (30% × 300 × 5%) = $25 × 4.5 × 200 = $22,500 × × (number of out-ofcontrol conditions not discovered immediately) (1/3 × 600) E10-2 The average lead time will be 26 days, calculated as follows: Reduction of vendor lead time = 1/6 × 18 days = days Because the rate of output will be unchanged, a reduction of WIP to one-third of its present level will triple the velocity The average order will then remain in WIP only one-third as long, saving two-thirds of time presently being spent in WIP: Reduction of time in WIP New lead time = 2/3 of present time in WIP = 2/3 × 12 days = days = present lead time – reductions = 37 days – (3 days + days) = 26 days This approach can be used even if the other components of total lead time, such as the two days in final inspection, are not stated If all the components of total lead time are known, as in this exercise, then the new lead time can be calculated by adding all its components: (5/6 × 18) + + (1/3 × 12) + + = 15 + + + + = 26 days To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 10 10-3 E10-3 The expected annual savings is $2,200,000, calculated as follows: Doubling the velocity of all tasks, from receipt of order to shipment and from ordering materials to issuing materials to production, will reduce WIP and materials inventories by half, therefore: Reduction in materials carrying costs Reduction in WIP carrying costs = 20% × materials reduction = 20% × (1/2 × $3,000,000) = $300,000 = 20% × WIP reduction = 20% × (1/2 × $5,000,000) = $500,000 This change will also reduce customer lead time from eight weeks to four weeks Because customers are willing to wait up to five weeks for shipment, all shipments can then be made-to-order There will no longer be a need for finished goods inventory Once the existing finished goods inventory is liquidated by sales or scrapping, the annual savings from not carrying finished goods will be: Reduction in finished goods carrying costs = 20% × finished goods reduction = 20% × (100% × $7,000,000) = $1,400,000 Total savings = $300,000 + $500,000 + $1,400,000 = $2,200,000 (This exercise is based closely on an actual case of a partial JIT implementation The name of the company and dollar amounts have been altered.) E10-4 (1) (a) (b) (c) (2) Equivalent production = 4,500 + (.50 × 20) = 4,510 units; $300, 740 = $66.683 per unit 4, 510 $300, 000 = $66.667 per unit 4, 500 units started = 4,500 + 20 – 24 = 4,496 units; $300, 000 = $66.726 per unit 4, 496 $667, because 20 × 50 × $66.683 = $666.83 $667, because 20 × 50 × $66.667 = $666.67 $667, because 20 × 50 × $66.726 = $667.26 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com 10-4 Chapter 10 E10-4 (Concluded) (3) Considering that the results of requirement (2) were the same (to the nearest dollar) for all three methods, then method (1) (b) would be recommended because of its ease and simplicity Method (1) (c) is a close second choice, also because of ease and simplicity.The details of method (1) (a) may not be justifiable in these circumstances (4) Processing speed is very fast, with the result that work in process inventory levels are kept to a very low level—both in absolute terms and in relation to total production activity for a month E10-5 Journal entries involving RIP and/or finished goods are: Raw and in Process Accounts Payable 456,000 456,000 A summary entry for all receipts of raw materials during the period When direct materials are used, no entry is needed, because the materials remain in RIP Finished Goods Raw and in Process 455,000 455,000 To backflush material cost from RIP to finished goods This is a postdeduction The calculation is: Material in May RIP balance Material received during May Material in May 31 RIP, per physical count Amount to be backflushed Cost of Goods Sold Finished Goods $ 19,000 456,000 $475,000 20,000 $455,000 461,000 461,000 To backflush material cost from finished goods to cost of goods sold This is a postdeduction The calculation is: Material in May finished goods Material backflushed to finished goods Material in May 31 finished goods, per physical count Amount to be backflushed $ 16,000 455,000 $471,000 10,000 $461,000 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 10 10-5 E10-5 (Concluded) Cost of Goods Sold Raw and in Process Finished Goods 1,700 200 1,500 Conversion cost in RIP is adjusted from the $2,300 of May to the $2,100 estimate at May 31 Conversion cost in finished goods is adjusted from the $6,500 of May to the $5,000 estimate at May 31 The offsetting entry is made to the cost of goods sold account, where all conversion costs were charged during May E10-6 The journal entries involving RIP and/or finished goods are: Raw and in Process Accounts Payable 222,000 222,000 A summary entry for all receipts of raw materials during the period When direct materials are used, no entry is needed, because the materials remain in RIP Finished Goods Raw and in Process 221,500 221,500 To backflush material cost from RIP to finished goods This is a postdeduction The calculation is: Material in June RIP balance Material received during June Material in June 30 RIP, per physical count Amount to be backflushed $ 10,500 222,000 $232,500 11,000 $221,500 Cost of Goods Sold Finished Goods 223,500 223,500 To backflush material cost from finished goods to cost of goods sold This is a postdeduction The calculation is: Material in June finished goods Material backflushed from RIP Material in June 30 finished goods, per physical count Amount to be backflushed $ 8,000 221,500 $229,500 6,000 $223,500 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com 10-6 Chapter 10 E10-6 (Concluded) Raw and in Process Finished Goods Cost of Goods Sold 600 500 100 Conversion cost in RIP is adjusted from the $1,200 of June to the $1,800 estimate at June 30 Conversion cost in finished goods is adjusted from the $4,000 at June to the $3,500 estimate at June 30 The offsetting entry is made to the cost of goods sold account, where all conversion costs were charged during June E10-7 Journal entries involving the RIP account are: Raw and in Process Accounts Payable 200,000 200,000 A summary entry for all receipts of raw materials during the period When direct materials are used, no entry is needed, because they remain a part of RIP Finished Goods Raw and in Process 199,800 199,800 To backflush material cost from RIP to Finished Goods This is a postdeduction The calculation is: Material in March RIP balance Material received during March 9,000 200,000 $209,000 Material in March 31 RIP, per physical count 9,200 Amount to be backflushed $199,800 Raw and in Process Cost of Goods Sold $ 300 300 Conversion cost in RIP is adjusted from the $1,000 of March to the $1,300 estimate at March 31 The offsetting entry is made to the cost of goods sold account, where all conversion costs were charged during March To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 10 10-7 E10-8 Journal entries involving the RIP accounts are: Raw and in Process Accounts Payable 367,000 367,000 A summary entry for all receipts of raw materials during the period When direct materials are used, no entry is needed, because they remain a part of RIP Finished Goods Raw and in Process 365,400 365,400 To backflush material cost from RIP to Finished Goods This is a postdeduction The calculation is: Material in April RIP balance Material received during April Material in April 30 RIP, per physical count Amount to be backflushed Raw and in Process Cost of Goods Sold $ 29,600 367,000 $396,600 31,200 $365,400 400 400 Conversion cost in RIP is adjusted from the $1,400 of April to the $1,800 estimate at April 30 The offsetting entry is made to the cost of goods sold account, where all conversion costs were charged during April E10-9 Journal entries involving the RIP accounts are: Raw and in Process Accounts Payable 246,000 246,000 A summary entry for all receipts of raw materials during the period When direct materials are used, no entry is needed, because they remain a part of RIP Cost of Goods Sold Raw and in Process 247,000 247,000 To backflush material cost from RIP to Cost of Goods Sold This is a postdeduction The calculation is: Material in May RIP balance Material received during May Material in May 31 RIP, per physical count Amount to be backflushed $ 11,000 246,000 $257,000 10,000 $247,000 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com 10-8 Chapter 10 E10-9 (Concluded) Raw and in Process Cost of Goods Sold 800 800 Conversion cost in RIP is adjusted from the $1,300 of May to the $2,100 estimate at May 31 The offsetting entry is made to the cost of goods sold account, where all conversion costs were charged during May E10-10 (1) The most recent purchase involved a quantity greater than the total materials in ending inventories, and that purchase gives a cost of materials of $420,000/1,400, or $300 per unit of output; therefore, Materials cost of finished goods ending inventory = 50 units × $300 per unit = $15,000 (2) The conversion cost per unit is calculated by dividing the total conversion cost by (a) the number of units started, (b) the number completed, or (c) the number completed plus the number of partially converted units in the RIP ending inventory (not an equivalent units calculation): (a) (b) (c) (3) $290,160 ÷ 3,000 = $96.72 conversion cost per unit $290,160 ÷ 3,100 = $93.60 conversion cost per unit $290,160 ÷ 3,120 = $93.00 conversion cost per unit The three possible amounts for the conversion cost of the 50 units in finished goods ending inventory are: 50 units @ $96.72 = $4,836 of conversion cost 50 units @ $93.60 = $4,680 of conversion cost 50 units @ $93.00 = $4,650 of conversion cost (4) Lowest = $15,000 materials + $4,650 conversion = $19,650 Highest = $15,000 materials + $4,836 conversion = $19,836 Dollar difference = $19,836 – $19,650 = $186 Difference, to nearest 1/10 percent = $186 ÷ $19,650 = 0.9% To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 10 10-9 E10-11 (1) A $300 materials cost per unit was calculated in requirement (1) of the previous exercise; therefore, Materials cost of RIP ending inventory = 220 units × $300 per unit = $66,000 (2) The three possible amounts for the conversion cost of the RIP ending inventory of 20 units, 50% converted, are: 20 units × 50% × $96.72 = $967.20 of conversion cost 20 units × 50% × $93.60 = $936 of conversion cost 20 units × 50% × $93.00 = $930 of conversion cost It seems inconsistent to assign 50% conversion costs to RIP when the units in RIP were counted as whole physical units in the denominator of the conversion cost per unit calculation in requirement 2(c) of E10-10, and when they were not counted at all in the denominator of the calculation in requirement 2(b) of E1010 But the total dollar difference assigned to RIP is immaterial Whatever the amount of conversion costs assigned to RIP and finished goods, the remainder of total conversion costs simply remains in cost of goods sold Lowest = $66,000 materials + $930 conversion = $66,930 Highest = $66,000 materials + $967 conversion = $66,967 Dollar difference = $66,967 – $66,930 = $37 Difference, to nearest 1/10 percent = $37 ÷ $66,930 = 1% To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com 10-10 Chapter 10 PROBLEMS P10-1 (1) The expected annual savings are $720,000, consisting of $384,000 carrying costs savings and $336,000 savings in the cost of defects, calculated as follows: Carrying cost savings = = = = 30% × reduction in average variable cost of WIP 30% × 40% × past average variable cost of WIP × × (40 × 200 × $400) $384,000 Savings in cost of defects = $60 × reduction in number of defective units (reduction in number = $60 × of defective units × produced per undiscovered flaw) = $60 × (40% × 200 × 20%) = $60 × 16 × 350 = $336,000 × (number of flaws not discovered immediately) (1/4 × 1,400) (2) Likely benefits that are not assessable from the information given include the following: (a) Faster cycle time resulting from the higher velocity of WIP (Because the rate of final output will not change, velocity will change inversely with the change in WIP levels.) The faster cycle time will improve the speed with which orders can be filled, thus increasing customer satisfaction and perhaps increasing perceived product value so that prices can be raised (or price cuts delayed or avoided) (b) If, as a result of the shorter cycle time, total lead time becomes less than the time customers are willing to wait for an order, then the company would no longer need to maintain a finished goods inventory This possibility would result in additional savings in floor space and other inventory carrying costs (The value of the floor space freed up by eliminating 40% of WIP storage is not an additional benefit; inventory carrying costs include storage costs, so the value of the floor space is included in the carrying cost savings calculated in requirement (1).) (3) Costs and other negatives to be compared with the savings include: (a) The increased likelihood of shutdowns due to work locations being starved for WIP; lower WIP levels at each station represent lower safety stocks, so stockouts are more likely at all locations To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 10 10-11 (b) The cost of starting a larger number of batches or lots into production, which includes the cost of processing more work orders, production orders, and material requisitions (To reduce average WIP size, either smaller batches must be started at shorter intervals, or protracted stockouts must be allowed to occur; otherwise, the average size of WIP will not drop.) (c) The cost of handling more loads of materials If lot sizes are small enough to require only one load per lot both before and after the change, then a larger number of lots will result in a larger total number of loads (d) The cost of performing a larger number of setups to permit running a larger number of batches or lots of smaller size Ideally, as part of the JIT implementation, setup cost will be driven down to eliminate this problem P10-2 (1) Protech could achieve an average lead time on these orders of 42 days, calculated as follows: Reduction of time in WIP = = = = 3/4 of present time in WIP 3/4 ì (360 days ữ 10) 3/4 × 36 days 27 days Reduction of vendor lead time = 1/3 × 27 days = days New lead time = present lead time – reductions = 78 days – (27 days + days) = 42 days Note: It is not stated that Protech defines WIP and WIP turnover in a way that excludes the two days spent in receiving and the three days spent in final inspection.To check that the average cycle time of 360 days/10, or 36 days, does exclude those steps (so that there is no double-counting), note that a cycle time of 36 days, when added to the other intervals mentioned, gives the stated total lead time of 78 days: + 27 + + 36 + + = 78 (2) The advantages of shorter lead time include: (a) The value of the floor space freed up by eliminating three-fourths of WIP storage (b) Improvement in the speed with which orders can be filled, which should increase customer satisfaction and perhaps increase perceived product value so that prices can be raised (or price cuts delayed or avoided) (c) If the new 42-day total lead time is less than the time customers are willing to wait for an order, then the company would no longer need to maintain a finished goods inventory This possibility would result in additional savings in floor space and other inventory carrying costs To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com 10-12 Chapter 10 P10-2 (Concluded) (3) Costs and other negatives to be compared with the savings include: (a) The increased likelihood of shutdowns due to work locations being starved for WIP; lower WIP levels at each station represent lower safety stocks, so stockouts are more likely at all locations (b) The cost of starting a larger number of batches or lots into production, which includes the cost of processing more work orders, production orders, and material requisitions (Reducing average WIP size generally requires starting smaller batches at shorter intervals.) (c) The cost of handling more loads of materials If lot sizes are small enough to require only one load per lot both before and after the change, then a larger number of lots will result in a larger total number of loads (d) The cost of performing a larger number of setups to permit running a larger number of batches, or lots, of smaller size Ideally, as part of the JIT implementation, setup cost will be driven down to eliminate this problem (e) The time and effort that may be required to induce vendors to reduce their lead time by one-third P10-3 (1) (a) Raw and in Process Accounts Payable 850,000 850,000 A summary entry for all receipts of raw materials during the period When direct materials are used, no entry is needed, because they remain a part of RIP (b) (c) (d) Factory Overhead Control Supplies Indirect materials are recorded as used 13,000 Payroll Accrued Payroll 400,000 Accrued Payroll Cash 400,000 Cost of Goods Sold Factory Overhead Control Marketing Expenses Control Administrative Expenses Control Payroll 60,000 120,000 130,000 90,000 13,000 400,000 400,000 400,000 Direct labor is expensed to the cost of goods sold account (e) Factory Overhead Control Accumulated Depreciation Prepaid Insurance 681,000 668,000 13,000 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 10 10-13 P10-3 (Continued) (f) Factory Overhead Control Cash Accounts Payable (g) Cost of Goods Sold Factory Overhead Control 83,000 54,000 29,000 897,000 897,000 Overhead is expensed to the cost of goods sold account (h) Finished Goods Raw and in Process 844,000 844,000 To backflush material cost from RIP to finished goods This is a postdeduction The calculation is: Material in June RIP balance Material received during June Material in June 30 RIP, per physical count Amount to be backflushed (i) Cost of Goods Sold Finished Goods $ 40,000 850,000 $890,000 46,000 $844,000 852,000 852,000 To backflush material cost from Finished Goods to Cost of Goods Sold The calculation is: Material in June Finished Goods Material cost transferred from RIP Material in June 30 finished goods, per physical count Amount to be backflushed (j) Raw and in Process Cost of Goods Sold Finished Goods $ 190,000 844,000 $1,034,000 182,000 $ 852,000 300 1,700 2,000 Conversion costs in the inventory accounts are adjusted to the estimates made in the June 30 physical count For RIP, the adjustment is from the $1,600 of June to $1,900 on June 30; for Finished Goods, the adjustment is from the $180,000 of June to $178,000 on June 30 The offsetting entry is made to the cost of goods sold account, where all conversion costs were charged during June To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com 10-14 Chapter 10 P10-3 (Concluded) (2) The three completed accounts are 6/1 (a) (j) 6/30 6/1 (d) (g) (i) (j) 6/30 P10-4 (1) (a) Raw and in Process 41,600 (h) 844,000 850,000 300 47,900 6/1 (h) 6/30 Finished Goods 370,000 (i) 852,000 844,000 (j) 2,000 360,000 Cost of Goods Sold -060,000 897,000 852,000 1,700 1,810,700 Raw and in Process Accounts Payable 620,000 620,000 A summary entry for all receipts of raw materials during the period As direct materials are used, no entry is needed, because they remain a part of RIP (b) Factory Overhead Control Supplies 10,000 10,000 Indirect materials are recorded as used (c) (d) Payroll Accrued Payroll 300,000 Accrued Payroll Cash 300,000 Cost of Goods Sold Factory Overhead Control Marketing Expenses Control Administrative Expenses Control Payroll 50,000 90,000 90,000 70,000 300,000 300,000 300,000 Direct labor is expensed to the cost of goods sold account (e) (f) Factory Overhead Control Accumulated Depreciation Prepaid Insurance 523,000 Factory Overhead Control Cash Accounts Payable 33,000 514,000 9,000 26,000 7,000 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 10 10-15 P10-4 (Continued) (g) Cost of Goods Sold Factory Overhead Control 656,000 656,000 Overhead is expensed to the cost of goods sold account (h) Finished Goods Raw and in Process 615,000 615,000 To backflush material cost from RIP to Finished Goods This is a post-deduction The calculation is: Material in May RIP balance Material received during May Material in May 31 RIP, per physical count Amount to be backflushed (i) Cost of Goods Sold Finished Goods $ 30,000 620,000 $650,000 35,000 $615,000 605,000 605,000 To backflush material cost from Finished Goods to Cost of Goods Sold The calculation is: Material in May Finished Goods Material cost transferred from RIP Material in May 31 Finished Goods, per physical count Amount to be backflushed (j) Raw and in Process Finished Goods Cost of Goods Sold $ 150,000 615,000 $ 765,000 160,000 $ 605,000 800 4,000 4,800 Conversion costs in the inventory accounts are adjusted to the estimates made in the May 31 physical count For RIP, the adjustment is from the $1,300 of May to $2,100 on May 31; for Finished Goods, the adjustment is from the $130,000 of May to $134,000 on May 31 The offsetting entry is made to the cost of goods sold account, where all conversion costs were charged during May To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com 10-16 Chapter 10 P10-4 (Concluded) (2) The three completed accounts are 5/1 (a) (j) 5/31 5/1 (d) (g) (i) 5/31 Raw and in Process 31,300 (h) 615,000 620,000 800 37,100 5/1 (h) (j) 5/31 Finished Goods 280,000 (i) 605,000 615,000 4,000 294,000 Cost of Goods Sold -0- (j) 4,800 50,000 656,000 605,000 1,306,200 P10-5 (1) Contribution margin of lost sales (20,000 units): Revenue ($10,800 ÷ 900 units) Variable costs: Cost of sales ($4,050 ÷ 900) Marketing and administrative ($900 ÷ 900) Total variable cost Unit contribution margin Volume of lost sales Total contribution margin of lost sales Overtime premiums (overtime cost is less than the additional contribution margin of lost sales): 15,000 × $6.50 = $97,500 > $40,000 Rental savings Rental income from owned warehouse (12,000 × 75 × $1.50) Elimination of insurance and property taxes Opportunity cost of funds released from inventory investment: Investment in inventory ⎛ ⎞ Interest before tax ⎜ 12 ⎟ ⎝ 1− 40 ⎠ Estimated before-tax dollar savings $ 12.00 $ 4.50 1.00 $ 5.50 $ 6.50 × 20,000 $(130,000) $ (40,000) 60,000 13,500 14,000 $ 600,000 20 120,000 $ 37,500 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 10 10-17 P10-5 (Concluded) (2) Conditions that should exist in order for a company to install just-in-time inventory successfully include the following: (a) Top management must be committed and provide the necessary leadership support in order to ensure a company-wide, coordinated effort (b) A detailed system for integrating the sequential operations of the manufacturing process needs to be developed and implemented Raw materials must arrive when needed for each subassembly, so that the production process functions smoothly (c) Accurate sales forecasts are needed for effective finished goods planning and production scheduling (d) Products should be designed to use standardized parts to reduce manufacturing time and reduce costs (e) Reliable vendors who can deliver quality raw materials on time with minimum lead time must be obtained  ... $22,500 savings in the cost of defects, calculated as follows: Carrying cost savings = = = = 25% × reduction in average variable cost of WIP 25% × 30% × past average variable cost of WIP 25 × × (10... $96.72 conversion cost per unit $290,160 ÷ 3,100 = $93.60 conversion cost per unit $290,160 ÷ 3,120 = $93.00 conversion cost per unit The three possible amounts for the conversion cost of the 50... $967.20 of conversion cost 20 units × 50% × $93.60 = $936 of conversion cost 20 units × 50% × $93.00 = $930 of conversion cost It seems inconsistent to assign 50% conversion costs to RIP when the