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

Answer 1

Compute total cost of composite raw material of 30,000 square yards: Cost=Cost of metal +Delivery cost =[(30,000x$11.40%(100%-5%)]+$3,360 = $328,260 Compute total cost of Blended plastic of 35,000 pounds: Cost =Blended plastic +Delivery cost = $27,125+$1050 = $28,175 Total Spatula produced = 25,000 units Composite metal used = 5,000 square yards Total cost of Composite metal used = Total cost of raw material + Process cost = 328,620x3,0 +13,200 =67,910 As per GAAP:

Total cost Compute historical cost per unit production of spatula= No.of units 71,774 35,000 = $2.0506 per unit Total cost of blended plastic used = 28.175x= 264800 35,000 =3864 Total cost of production of 25,000 spatula = 67,910+3864 = 71,774