Group Case Study: General Instrumentation Company

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

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?

In order to meet customer demands for higher product quality, to comply with federally-mandated environmental regulations, and to reduce production costs, HCC must spend $2,000,000 within the next three years to upgrade equipment. The upgrade is expected to result in production efficiencies that will lower material and labor costs by reducing defective products, process waste, in-process inventory, and production man-hours through simplified work processes. It has been over a decade since significant modifications were made to the production facilities. Those changes were mostly technical in nature and did not substantially alter work processes or reduce overall employment. The average productivity gain in the industry for the past five years has been 3% per year. Financing for the loan to purchase the equipment

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

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

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

a. Assuming the most current operational cost levels, what sales must it generate to recoup the above investment?

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.

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

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

2. What is the total cost? How much of the total cost are labor costs? Capital costs?

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.

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