Question

In March, Giada at Home Products began manufacturing a new spatula that consumers were expected to flip over. The spatula was designed to be produced from composite metal and a blended plastic. Giada at Home Products made the purchased materials during March in the following transactions: Composite Metal: On March 3, Giada at Home Products received 30,000 square yards of the composite metal from its supplier at a cost of $11.40 per square yard reduced by a 5.0% discount on time order. The metal was delivered at a cost of $3,360 under FOB Shipping Point terms. On March 4, Giada at Home Products incurred $13,200 of costs to treat the metal prior to its use in the production of the spatulas. Blended Plastic: On March 5, Giada at Home Products received 35,000 pounds of the blended plastic from its supplier at a total cost of $27,125. The plastic was delivered at a cost of $1,050 under FOB Shipping Point terms. Spatula Production: Giada at Home Products reported the following data relating to spatula production during March: 25,000 spatulas produced 5,000 square yards of composite metal used 4,800 pounds blended plastic used Calculate the historic cost per square yard of the 30,000 square yards of the composite metal purchased by Giada at Home Products in March according to GAAP.

Calculate the historic cost per square yard of the 30,000 square yards of the composite metal purchased by Giada at Home Products in March according to GAAP.

Calculate the historic cost per pound of the 35,000 pounds of the blended plastic purchased by Giada at Home Products in March according to GAAP.

Answer 1

Answer:

Total cost of 30,000 square yards of composite raw material = Cost of metal + Delivery cost

= [(30,000 × $11.40 × (100% - 5%)] + $3,360

= $328,260

Total cost of 35,000 pounds of Blended plastic = Cost of plastic + Delivery cost

= $27,125 + 1,050 = $28,175

Total cost of composite metal used = Total cost of metal + Process cost

= ($328,260 × 5,000 / 30,000) + 13,200 = $67,910

Toral cost of blended plastic used = $28,175 × 4,800 / 35,000 = $3,864

Total cost of production of 25,000 spatula = $67,910 + 3,864 = $71,774

As per GAAP, Historical cost per square yard = total cost / No. of units

= $71,774 / 30,000 = $2.392467

As per GAAP, Historical cost per pound = total cost / No. of units

= $71,774 / 35,000 = $2.05069