Group Case Study: General Instrumentation Company

In using the ABC system, Valves and Pumps are matching the company’s target of 35% of gross margin apart from Flow Controllers. With the use of TAC, the gross margin on pump sales is 19.5% that well below the company's target gross margin of 35%. This indicates that the current overhead cost allocation practice did not reflect the real costs incurred on the products. The lower actual gross profit obtained was mainly due to wrong cost allocation on the pump product.

14. If 11,000 units are produced, what are the total amounts of direct and indirect manufacturing costs incurred to support this level of production?

Shaving 5% off the estimated direct labor-hours in the predetermined overhead rate will result in an artificially high overhead rate. The artificially high predetermined overhead rate is likely to result in overapplied overhead for the year. The cumulative effect of overapplying the overhead throughout the year is all recognized in December when the balance in the Manufacturing Overhead account is closed out to Cost of Goods Sold. If the balance were closed out every month or every quarter, this effect would be

Other annual benefits per employee-% of wages 18% Cost of raw materials per can 0.25 Other variable production costs per can 0.05

The assignment method was used in determining ways that the schedule can be change to maximize production while reducing idle time, completion time, and potentially labor costs. Using the information that was provided, Operator A will cost $10.00 for the first job, $11.00 for the second, $9.00 for the third, and $10.00 for the fourth. Operator B will cost $12.00 for the first job, $9.00 for the second job, $8.00 for the third, and $8.00 for the fourth. Operator C similarly will cost $11.00 for the first, $11.00 for the second, $11.00 for the third, and $9.00 for the fourth. Last, Operator D will cost $11.00 for the first, $11.00 for the second, $9.00 for the third, and $10.00 for the fourth. While

Rachel reviewed 2nd qtr. Clinical Contract Indicators with the committee. There were concerns regarding LabCorp reporting for the 2nd qtr. Steve told the group that with Rachel’s help we plan to dig into the process and to see where it is breaking down and reach out to LabCorp to identify the issues and correct the issues. More discussion about LabCorp will be discussed in future meetings.

During November, purchases of direct materials were $18,000. Direct labor and factory overhead costs were $20,000 and $28,000, respectively.

Therefore, the cost formula using direct labor-hours as the activity base is $17,000 per quarter plus $9.00 per direct labor-hour, or

Actual materials price $128 per ton Actual quantity of materials purchased and used 1,250 tons

Transfer pricing refers to the price that is applied to a transaction that occurs within a single organization, oftentimes between subsidiaries of the same company that are located in distinct regions or nations (McKinley & Owsley, 2013). For operational purposes these transactions are collapsed into a unified set of financial results, they are, however, identified and retained for accounting purposes. Transfer prices are crucial for tracking the taxable income assigned to a particular national jurisdiction when a multinational firm makes frequent use of transfers. In the United States, transfer pricing is predicated on the IRS and its ability to track taxable income that is sourced from a number of related parties. This allows entities like

I believe that our group worked well together, but this assignment was a lot harder then I thought it would be. Although there were only 5 members, there were different personalities and ALL members were very opinionated and set in doing things their way. It took a while before synergy and cohesion formed within the group. However, I strongly feel that ALL members were 100% committed to this project and wanted to do the very best job possible. I think this is why there was some conflict (and by that I mean very little) because ALL members were committed and cared about this assignment that much. We all put in the effort to make this project the bets it can be.

Setup for the machine is done for one batch of items. If we look at the the batch size of valves, it will be 375 units(=7500 units/ 20 production runs)

However, if Northern gets boxes from Thompson, operating capacity of Thompson will be maximized and excess inventory of Southern will be utilized. Only that, a transfer price should be set. Thompson will still realize profit even if it lowers down its price at West Paper’s offer of $430. Southern Division as well could lower down the price of its linerboard for Thompson. With the company’s adoption of a transfer pricing system, all these concerns will be addressed. Thompson division need not charge the full 20% of its overhead cost if it is not

Transfer pricing could be defined when a company trades goods/services and the allocation of profits and taxes with

Please discuss the possibilities of increasing Kamp’s profit by using the formula for basic cost per unit and by reorganizing. Please use a concrete example to indicate how the board of Kamp can manipulate the unit costs for the types 2, 3, and 4 by reorganizing its cost information system. How, do you think, can the boards of the Vecu concern and the MB division determine whether Kamp manipulates data on unit costs?