Problem 6.41 Case on Process Costing, Operation Costing, Impact on Resource Allocation Decision Golding Manufacturing. a disision of Farnsworth Sporting. Inc., produces two different models of bows and eight models of knis es. The bow-manufacturing process involves the production of two major subassemblies: the limbs and the handle. The limbs pass through four sequential processes before reaching final assembly: lay-up. molding. fabricating, and finishing. In the us,. Up Department, limbs are created by laminating layers of wood. In Molding, the limbs are hut treated, under pressure. to form a strong resilient limb. In the Fabricating Department, any pro. truding glue or other processing residue is removal. Finally, in Finishing, the limbs are cleaned with acetone, dried. and sprayed with the final finishes. The handles pass through two processes before reaching final assembly: pattern and finish. ing. In the Pattern Department, blocks of wood are fed into a machine that is set to shape the handles. Different patterns are possible, depending on the machine’s setting. After coming out of the machine, the handles are cleaned and smoothed. They then pass to the Finishing Depart-ment where they arc sprayed with the final finishes. In Final Assembly, the limbs and handle) arc assembled into different models using purchased parts such as pulley assemblies, weight adjustment bolts, side plates, and siring. Golding. since its inception, has been using process costing to assign product costs. A prede- termined overhead rate is used based on direct labor dollars (80 percent of direct labor dollars). Recently, Golding has hired a new controller, Karen Jenkins. After reviewing the product cost-ing procedures. Karen requested a mooing with the divisional manager. Aaron Suhr. The fol• lowing is a transcript of their conversation:
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