Chapter 1 Assignment
Manufacturing cost data for Banta Company are presented below.
Direct materials used
Direct labor
Manufacturing overhead
Total manufacturing costs
Work in process 1/1/17
Total cost of work in process
Work in Process 12/31/17
Cost of goods manufactured
Option A
$ (82,075)
47,000
46,500
175,575
(21,500)
197,075
(34,231)
162,844
Option B
$ 85,500
46,000
45,500
(177,000)
21,500
(198,500)
35,231
(163,269)
Option C
$ 78,050
(52,575)
47,750
178,375
(21,500)
199,875
35,751
(164,124)
Instructions
(a)
Indicate the missing amounts for each letter (a) through (i).
(b)
Banta Company must choose between options A, B and C. Evaluate the three options
and determine which one is in the best interest of Banta Company. Write a brief
paragraph to explain your reasoning. The options differ as follows:
 Option A uses moderately priced materials from a supplier that usually has the
quantities needed by Banta.
 Option B uses high quality materials that are readily available from a local
supplier. Labor and manufacturing costs can be reduced slightly since fewer
items fail quality tests during production.
 Option C uses slight significantly less expensive materials from a local supplier.
These lower quality materials result in higher labor and manufacturing overhead
costs.
a) Missing amounts are indicated above(red ones).
b) The option in the best interest of Banta Company is Option A. Because, Option C uses
lower quality materials which is not a good idea as the labour and manufacturing overhead
costs are high which is causing to an increased burden of extra cost. Option C is the most
expensive option with the least quality. Thus, it is not an eligible option. On the other hand, if we
look Option A and B, Option A uses moderately priced materials. Nevertheless cost of goods
manufactured is 162,844 which is lower than other 2 options. Besides, Option B uses high quality
material. Thus, the cost of goods manufactured(163,269) is more than option A. In conclusion,
Option A is more preferable as the material cost will be moderate and labor and overhead cost also
less.