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Recently, Mewah Designs expanded its market by becoming an original equipment supplier to
Jee Wrangler. Mewah Designs produces factory upgraded speakers specifically for Jee
Wrangler. The Kicker components and speaker cabinets are outsourced with assembly
remaining in-house. Mewah Designs assemble the product by placing the speakers and other
components in cabinets that define an audio package upgrade and that can be placed into the
Jee Wrangler, producing the desired factory-installed appearance. Speaker cabinets and
associated Kicker components are added at the beginning of the assembly process.
Assume that Mewah Designs uses the weighted-average method to cost out the audio package.
The following are cost and production data for the assembly process for April:
Production:
Units in process, April 1, 60% complete 60,000
Units completed and transferred out 150,000
Units in process, April 30, 20% complete 30,000
Costs:
WIP, April 1:
Cabinets RM 1,200,000
Kicker components RM 12,600,000
Conversion costs RM 5,400,000
Costs added during April:
Cabinets RM 2,400,000
Kicker components RM 25,200,000
Conversion costs RM 8,640,000
a) Develop a physical flow analysis for the assembly department for the month of April.
b) Calculate equivalent units of production for the assembly department for the month of
April.
c) Calculate the unit cost for the assembly department for the month of April.
d) Calculate the cost of units transferred out and the cost of EWIP inventory.
e) Develop a cost reconciliation for the assembly department for the month of April.
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- Steps in Preparing a Production Report Recently, Stillwater Designs expanded its market by becoming an original equipment supplier to Jeep Wrangler. Stillwater Designs produces factory upgraded speakers specifically for Jeep Wrangler. The Kicker components and speaker cabinets are outsourced with assembly remaining in house. Stillwater Designs assembles the product by placing the speakers and other components in cabinets that define an audio package upgrade and that can be placed into the Jeep Wrangler, producing the desired factory-installed appearance. Speaker cabinets and associated Kicker components are added at the beginning of the assembly process. Assume that Stillwater Designs uses the weighted average method to cost out the audio package. The following are cost and production data for the assembly process for April: Production: Units in process, April 1, 60% complete 60,000 Units completed and transferred out 150,000 Units in process, April 30, 20%…At Jeekes PolyChem Products LLC, customers needs are translated into product specifications by the design or engineering department. Which of the following objectives of production management is addressed by Jeekes Polychem Products LLC? a. Right time b. Right quality c. Right quantity d. Right cost Mr. Saud bought a new mobile phone for himself. He explained to his friend that the mobile phone has a camera, Facebook facility, and music facility in addition to the basic functions like phone calls and messaging. Which dimension of "product quality" is Mr. Saud referring to? a. Features b. Aesthetics c. Reputation d. ConformanceKagle design engineers are in the process of developing a new green product, one that will significantly reduce impact on the environment and yet still provide the desired customer functionality. Currently, two designs are being considered. The manager of Kagle has told the engineers that the cost for the new product cannot exceed 550 per unit (target cost). In the past, the Cost Accounting Department has given estimated costs using a unit-based system. At the request of the Engineering Department, Cost Accounting is providing both unit-and activity-based accounting information (made possible by a recent pilot study producing the activity-based data). Unit-based system: Variable conversion activity rate: 100 per direct labor hour Material usage rate: 20 per part ABC system: Labor usage: 15 per direct labor hour Material usage (direct materials): 20 per part Machining: 75 per machine hour Purchasing activity: 150 per purchase order Setup activity: 3,000 per setup hour Warranty activity: 500 per returned unit (usually requires extensive rework) Customer repair cost: 25 per repair hour (average) Required: 1. Select the lower-cost design using unit-based costing. Are logistical and post-purchase activities considered in this analysis? 2. Select the lower-cost design using ABC analysis. Explain why the analysis differs from the unit-based analysis. 3. What if the post-purchase cost was an environmental contaminant and amounted to 10 per unit for Design A and 40 per unit for Design B? Assume that the environmental cost is borne by society. Now which is the better design?
- Hales Company produces a product that requires two processes. In the first process, a subassembly is produced (subassembly A). In the second process, this subassembly and a subassembly purchased from outside the company (subassembly B) are assembled to produce the final product. For simplicity, assume that the assembly of one final unit takes the same time as the production of subassembly A. Subassembly A is placed in a container and sent to an area called the subassembly stores (SB stores) area. A production Kanban is attached to this container. A second container, also with one subassembly, is located near the assembly line (called the withdrawal store). This container has attached to it a withdrawal Kanban. Required: 1. Explain how withdrawal and production Kanban cards are used to control the work flow between the two processes. How does this approach minimize inventories? 2. Explain how vendor Kanban cards can be used to control the flow of the purchased subassembly. What implications does this have for supplier relationships? What role, if any, do continuous replenishment and EDI play in this process?Pocket Umbrella, Inc. is considering producing a new type of umbrella. This new pocket-sized umbrella would fit into a coat pocket or purse. Classify the following costs of this new product as direct materials, direct labor, manufacturing overhead, or selling and administrative. Cost of advertising the product Fabric used to make the umbrellas Maintenance of cutting machines used to cut the umbrella fabric so it will fit the umbrella frame Wages of workers who assemble the product Presidents salary The salary of the supervisor of the people who assemble the product Wages of the product tester who stands in a shower to make sure the umbrellas do not leak Cost of market research survey Salary of the companys sales managers Depreciation of administrative office buildingAKL Foundry manufactures metal components for different kinds of equipment used by the aerospace, commercial aircraft, medical equipment, and electronic industries. The company uses investment casting to produce the required components. Investment casting consists of creating, in wax, a replica of the final product and pouring a hard shell around it. After removing the wax, molten metal is poured into the resulting cavity. What remains after the shell is broken is the desired metal object ready to be put to its designated use. Metal components pass through eight processes: gating, shell creating, foundry work, cutoff, grinding, finishing, welding, and strengthening. Gating creates the wax mold and clusters the wax pattern around a sprue (a hole through which the molten metal will be poured through the gates into the mold in the foundry process), which is joined and supported by gates (flow channels) to form a tree of patterns. In the shell-creating process, the wax molds are alternately dipped in a ceramic slurry and a fluidized bed of progressively coarser refractory grain until a sufficiently thick shell (or mold) completely encases the wax pattern. After drying, the mold is sent to the foundry process. Here, the wax is melted out of the mold, and the shell is fired, strengthened, and brought to the proper temperature. Molten metal is then poured into the dewaxed shell. Finally, the ceramic shell is removed, and the finished product is sent to the cutoff process, where the parts are separated from the tree by the use of a band saw. The parts are then sent to the grinding process, where the gates that allowed the molten metal to flow into the ceramic cavities are ground off using large abrasive grinders. In the finishing process, rough edges caused by the grinders are removed by small handheld pneumatic tools. Parts that are flawed at this point are sent to welding for corrective treatment. The last process uses heat to treat the parts to bring them to the desired strength. In 20X1, the two partners who owned AKL Foundry decided to split up and divide the business. In dissolving their business relationship, they were faced with the problem of dividing the business assets equitably. Since the company had two plantsone in Arizona and one in New Mexicoa suggestion was made to split the business on the basis of geographic location. One partner would assume ownership of the plant in New Mexico, and the other would assume ownership of the plant in Arizona. However, this arrangement had one major complication: the amount of WIP inventory located in the Arizona plant. The Arizona facilities had been in operation for more than a decade and were full of WIP. The New Mexico facility had been operational for only 2 years and had much smaller WIP inventories. The partner located in New Mexico argued that to disregard the unequal value of the WIP inventories would be grossly unfair. Unfortunately, during the entire business history of AKL Foundry, WIP inventories had never been assigned any value. In computing the cost of goods sold each year, the company had followed the policy of adding depreciation to the out-of-pocket costs of direct labor, direct materials, and overhead. Accruals for the company are nearly nonexistent, and there are hardly ever any ending inventories of materials. During 20X1, the Arizona plant had sales of 2,028,670. The cost of goods sold is itemized as follows: Upon request, the owners of AKL provided the following supplementary information (percentages are cumulative): Gating had 10,000 units in BWIP, 60% complete. Assume that all materials are added at the beginning of each process. During the year, 50,000 units were completed and transferred out. The ending inventory had 11,000 unfinished units, 60% complete. Required: 1. The partners of AKL want a reasonable estimate of the cost of WIP inventories. Using the gating departments inventory as an example, prepare an estimate of the cost of the EWIP. What assumptions did you make? Did you use the FIFO or weighted average method? Why? (Note: Round unit cost to two decimal places.) 2. Assume that the shell-creating process has 8,000 units in BWIP, 20% complete. During the year, 50,000 units were completed and transferred out. (Note: All 50,000 units were sold; no other units were sold.) The EWIP inventory had 8,000 units, 30% complete. Compute the value of the shell-creating departments EWIP. What additional assumptions had to be made?
- KarlAuto Corporation manufactures automobiles, vans, and trucks. Among the various KarlAuto plants around the United States is the Bloomington plant, where vinyl covers and upholstery fabric are sewn. These are used to cover interior seating and other surfaces of KarlAuto products. Pam Teegin is the plant manager for the Bloomington cover plantthe first KarlAuto plant in the region. As other area plants were opened, Teegin, in recognition of her management ability, was given the responsibility to manage them. Teegin functions as a regional manager, although the budget for her and her staff is charged to the Bloomington plant. Teegin has just received a report indicating that KarlAuto could purchase the entire annual output of the Bloomington cover plant from outside suppliers for 32 million. Teegin was astonished at the low outside price, because the budget for the Bloomington plants operating costs was set at 56.45 million. Teegin believes that the Bloomington plant will have to close down operations in order to realize the 24.45 million in annual cost savings. The budget (in thousands) for the Bloomington plants operating costs for the coming year follows: Additional facts regarding the plants operations are as follows: Due to the Bloomington plants commitment to use high-quality fabrics in all of its products, the Purchasing Department was instructed to place blanket orders with major suppliers to ensure the receipt of sufficient materials for the coming year. If these orders are canceled as a consequence of the plant closing, termination charges would amount to 18 percent of the cost of direct materials. Approximately 600 plant employees will lose their jobs if the plant is closed. This includes all direct laborers and supervisors as well as the plumbers, electricians, and other skilled workers classified as indirect plant workers. Some would be able to find new jobs, but many others would have difficulty. All employees would have difficulty matching the Bloomington plants base pay of 29.40 per hour, the highest in the area. A clause in the Bloomington plants contract with the union may help some employees; the company must provide employment assistance to its former employees for 12 months after a plant closing. The estimated cost to administer this service would be 1 million for the year. Some employees would probably elect early retirement because the company has an excellent pension plan. In fact, 4.6 million of next years pension expense would continue whether or not the plant is open. Teegin and her staff would not be affected by the closing of the Bloomington plant. They would still be responsible for administering three other area plants. 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After the two parts are inserted, testing is done to ensure that the two parts work as intended. Reordering occurs because one or both of the parts have failed the test and it is necessary to replenish part inventories. Activity cost information and other data needed for supplier costing are as follows: I. Activity Costs Caused by Suppliers (testing failures and reordering as a result) Activity Costs Testing parts $4,500,000 Reordering parts 1,125,000 II. Supplier Data Otavalo Manufacturing Piura Company Part #625 Part #827 Part #625 Part #827 Unit purchase price $30 $78 $36 $84 Units purchased 450,000 225,000 56,250 56,250 Failed tests 4,500…Lansing Electronics Inc. manufactures a variety of printers, scanners, and fax machines in itstwo divisions: the PSF Division and the Components Division. The Components Division produces electronic components that can be used by the PSF Division. All the components thisdivision produces can be sold to outside customers. However, from the beginning, nearly allof its output has been used internally. The current policy requires that all internal transfers ofcomponents be transferred at full cost.Recently, Cam DeVonn, the chief executive officer of Lansing Electronics, decided to investigate the transfer pricing policy. He was concerned that the current method of pricing internaltransfers might force decisions by divisional managers that would be suboptimal for the firm. Aspart of his inquiry, he gathered some information concerning Component Y34, which is usedby the PSF Division in its production of a basic scanner, Model SC67.The PSF Division sells 40,000 units of Model SC67 each year…
- The Sedona Company is dedicated to making products that meet the needs of customers in a sustainable manner. Sedona is best known for its KLN water bottle, which is a BPA-free, dishwasher-safe, bubbly glass bottle in a soft silicone sleeve. The production process consists of three basic operations. In the first operation, the glass is formed by remelting cullets (broken or refuse glass). In the second operation, the glass is assembled with the silicone gasket and sleeve. The resulting product is finished in the final operation with the addition of the polypropylene cap. Consulting studies have indicated that of the total conversion costs required to complete a finished unit, the forming operation requires 60%, the assembly 30%, and the finishing 10%. Cullets purchased $67,500 Silicone purchased $24,000 Polypropylene used $ 6,000 Total conversion costs incurred $68,850 Ending inventory, cullets $ 4,500 Ending inventory, silicone $ 3,000 Number of bottles completed and transferred…The Sedona Company is dedicated to making products that meet the needs of customers in a sustainable manner. Sedona is best known for its KLN water bottle, which is a BPA-free, dishwasher-safe, bubbly glass bottle in a soft silicone sleeve. The production process consists of three basic operations. In the first operation, the glass is formed by remelting cullets (broken or refuse glass). In the second operation, the glass is assembled with the silicone gasket and sleeve. The resulting product is finished in the final operation with the addition of the polypropylene cap. Consulting studies have indicated that of the total conversion costs required to complete a finished unit, the forming operation requires 60%, the assembly 30%, and the finishing 10%. Cullets purchased $67,500 Silicone purchased $24,000 Polypropylene used $ 6,000 Total conversion costs incurred $68,850 Ending inventory, cullets $ 4,500 Ending inventory, silicone $ 3,000 Number of bottles completed and transferred…The Sedona Company is dedicated to making products that meet the needs of customers in a sustainable manner. Sedona is best known for its KLN water bottle, which is a BPA-free, dishwasher-safe, bubbly glass bottle in a soft silicone sleeve. The production process consists of three basic operations. In the first operation, the glass is formed by remelting cullets (broken or refuse glass). In the second operation, the glass is assembled with the silicone gasket and sleeve. The resulting product is finished in the final operation with the addition of the polypropylene cap. Consulting studies have indicated that of the total conversion costs required to complete a finished unit, the forming operation requires 60%, the assembly 30%, and the finishing 10%. Cullets purchased $67,500 Silicone purchased $24,000 Polypropylene used $ 6,000 Total conversion costs incurred $68,850 Ending inventory, cullets $ 4,500 Ending inventory, silicone $ 3,000 Number of bottles completed and transferred…
