My Notes

Finally, the overhead numbers, from Table 2, were added to the direct material and direct labor to arrive at the ABC cost for each product in Table 3:

2. What is the total cost? How much of the total cost are labor cost & capital cost?

The budget analysis shows that the labor hours of the firm are higher than the budgeted amount. As such, the firm needs to evaluate the cost benefit analysis of making or buying their products. To make this decision, various factors need to be considered. Before making the decision, Peyton needs to evaluate the marginal costs and revenue of making versus buying the products. The firm should take the option which provides the highest marginal profit which is the

Determine the actual costs incurred during the month of May for direct materials, direct labor, and manufacturing overhead.

* Calculated correctly—No. The correct calculation would equal what the material can be sold for at the current market value: 25,000 lbs x $9/per lb = $225,000

Question 3: Identify all costs associated with this venture. Categorize these costs as fixed or variable.

2.) For each expense that is variable with respect to revenue hours, calculate the cost per revenue hour.

After a thorough discussion and analysis of the given data, we have chosen alternatives number one which is to increase the selling price and number three to decrease the variable costs since it generates higher contribution margin ratio which we considered to be the determinant in achieving the 176m profit. The contribution margin ratio tells a company how much of the contribution margin of its products change in response to an increase or decrease in sales volume. As the sales increases the contribution margin also will increase and will have an equivalent increase in profit.

Hasan, M. S. (2016). VARIABLE COSTING AND ITS APPLICATIONS IN MANUFACTURING COMPANY. International Journal of Information, Business and Management, 8(2), 145-157. Retrieved from http://prx-herzing.lirn.net/login?url=http://search.proquest.com.prx-herzing.lirn.net/docview/1778467564?accountid=167104

|100 Plastic Rings |100 Steel Rings | |Selling Price |$1,350.00 |$1,350.00 | |Material Cost |$17.65 |$321.90 | |Direct Labor Cost |$65.50 |$196.50 | |Overhead Rate |0.80 |0.80 | |Direct Overhead |$52.40 |$157.20 | | | | | |Total Variable Cost |$135.55 |$675.60 | |Contribution Margin,$ |$1214.45 |$674.40 | |Contribution Margin,% |90 |50 | |

4. Develop and diagram an Activity Based cost model using the information in the case Provide your best estimates about the cost and profitability of Wilkerson’s three product lines. What difference does your cost assignment have on operated product costs and profitability? What causes any shifts in cost and profitability?

b. Determine the amount of manufacturing overhead cost that would have been applied to the Hastings job.(show your work, 2 points)

Overhead costs include rent, office staff, depreciation, and other. Once the flexible budget was complete, variances between the actual and flexible budget could be calculated (Exhibit B). The variance for frame assembly was favorable with actual costs being $82,663 less than in the flexible budget. The variances for wheel and final assembly however were both unfavorable. Wheel assembly had an unfavorable variance of $50,650, while final assembly variance was the highest at an unfavorable variance of $231,200. Taking into account these three aspects of direct cost, direct cost has an unfavorable variance $199,187. Although most overhead costs are fixed, 2/3 of other costs are variable and increase with the increased production. As shown in Exhibit B, overhead variance is unfavorable at $60,000. The direct cost variance and overhead variable together lead to a total unfavorable variance of $259,187.

First, we have identified if there is really an insufficiency in the amount of selling prices set by the Sales Department, in reference to Exhibit 1 of the case. We did this through identifying the maximum amount of overhead costs that the company can incur for the three products and comparing it with the total overhead costs. See Table 1 for details.

The Martinez Company has decided to introduce a new product and would like to evaluate the costs of manufacturing through capital intensive and labor intensive manufacturing methods to determine which of the two methods to employ. The values to be used in the evaluation for capital intensive manufacturing are direct materials at $5 per unit, direct labor at $6 per unit, a variable overhead of $3 per unit, and fixed manufacturing costs of $2,508,000. The values for material, labor, and overhead are summed to find the total variable cost of $14. The labor intensive values are direct materials at $5.50 per unit, direct labor at $8 per