Bob Randall, cost accounting manager for Hemple Products, was asked to determine the costs of the activities performed within the company's Manufacturing Engineering Department. The department has the following activities: creating bills of materials (BOMs), studying manufacturing capabilities, improving manufacturing processes, training employees, and designing tools. The resource costs (from the general ledger) and the times to perform one unit of each activity are provided below. Resource Costs Activities Unit Time Driver Salaries $425,000 Creating BOMs 0.6 hr. No. of BOMs Equipment 92,000 Designing tools 3.7 hrs. No. of tool designs Supplies 43,000 Improving processes 1.1 hrs. Process improvement hrs. Total $560,000 Training employees 2.1 hrs. No. of training sessions Studying capabilities 2.1 hrs. Study hours Total machine and labor hours (at practical capacity): Machine hours 2,000 Engineering hours 18,000 Total hours 20,000 The activity, designing tools, uses the number of tools designed as the activity driver. Using a traditional approach, the cost of the designing tools activity was determined to be $193,000 with an expected activity output of 1,000 for the coming year. During the first week of the year, two jobs (Job 150 and Job 151) had a demand for 10 and 20 new tools, respectively. Required: 1. Calculate the capacity cost rate for the Manufacturing Engineering Department. Round your answer to the nearest cent.$ per hour 2. Using the capacity cost rate, determine the activity rates for each activity. Round your answers to the nearest cent. 3. Calculate the cost of designing tools that would be assigned to each job using the TDABC-derived activity rate and then repeat using the traditional ABC rate. 4. Now suppose that time for creating BOMs is 0.6 for a standard product but that creating a BOM for a custom product adds an additional 0.4 hour. Express the time equation for this added complexity. Round your answers to two decimal places. Place the amounts left to right, lowest to highest.
Bob Randall, cost
| Resource Costs | Activities | Unit Time | Driver | |||
| Salaries | $425,000 | Creating BOMs | 0.6 hr. | No. of BOMs | ||
| Equipment | 92,000 | Designing tools | 3.7 hrs. | No. of tool designs | ||
| Supplies | 43,000 | Improving processes | 1.1 hrs. | Process improvement hrs. | ||
| Total | $560,000 | Training employees | 2.1 hrs. | No. of training sessions | ||
| Studying capabilities | 2.1 hrs. | Study hours |
Total machine and labor hours (at practical capacity):
| Machine hours | 2,000 | |
| Engineering hours | 18,000 | |
| Total hours | 20,000 |
The activity, designing tools, uses the number of tools designed as the activity driver. Using a traditional approach, the cost of the designing tools activity was determined to be $193,000 with an expected activity output of 1,000 for the coming year. During the first week of the year, two jobs (Job 150 and Job 151) had a demand for 10 and 20 new tools, respectively.
Required:
1. Calculate the capacity cost rate for the Manufacturing Engineering Department. Round your answer to the nearest cent.
$ per hour
2. Using the capacity cost rate, determine the activity rates for each activity. Round your answers to the nearest cent.
3. Calculate the cost of designing tools that would be assigned to each job using the TDABC-derived activity rate and then repeat using the traditional ABC rate.
4. Now suppose that time for creating BOMs is 0.6 for a standard product but that creating a BOM for a custom product adds an additional 0.4 hour. Express the time equation for this added complexity. Round your answers to two decimal places. Place the amounts left to right, lowest to highest.
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