Iraq Inc. makes recyclable pots for plants and uses JIT to manage inventories and production. The following are standards for a typical 1-gallon pot: Annual Material Standards 32 ounces of Component X* $0.02 2 ounces of Component Y * $0.05 $0.64 0.10 $0.74 Current Material Standards 27 ounces of Component X* $0.02 . 4 ounces of Component Y* $0.05 $0.54 0.20 $0.74 In-house experiments indicated that changing the material standard would make the pots stronger, so the company issued an engineering change order for the product in February; this ECO established the current material standards. March production was 8,000 pots. Usage of raw material (all purchased at standard price) in March was 220,000 ounces of Component X and 31,000 ounces of Component Y. Required: a. Calculate the material quantity variance. b. Calculate the ECO variance. c. Summarize the company's effectiveness in managing March production costs. d. Comment on the circumstances in which a company would institute an ECO that results in the expected product cost being unchanged. 2019020

Iraq Inc. makes recyclable pots for plants and uses JIT to manage inventories and production. The following are standards for a typical 1-gallon pot: Annual Material Standards 32 ounces of Component X* $0.02 2 ounces of Component Y * $0.05 $0.64 0.10 $0.74 Current Material Standards 27 ounces of Component X* $0.02 . 4 ounces of Component Y* $0.05 $0.54 0.20 $0.74 In-house experiments indicated that changing the material standard would make the pots stronger, so the company issued an engineering change order for the product in February; this ECO established the current material standards. March production was 8,000 pots. Usage of raw material (all purchased at standard price) in March was 220,000 ounces of Component X and 31,000 ounces of Component Y. Required: a. Calculate the material quantity variance. b. Calculate the ECO variance. c. Summarize the company's effectiveness in managing March production costs. d. Comment on the circumstances in which a company would institute an ECO that results in the expected product cost being unchanged. 2019020

Name: Iraq Inc. makes recyclable pots for plants and uses JIT to manage inv
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Description: Iraq Inc. makes recyclable pots for plants and uses JIT to manage inventories and production. Thefollowing are standards for a typical 1-gallon pot:Annual Material Standards32 ounces of Component X* $0.022 ounces of Component Y * $0.05$0.640.10$0.74

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 25P: Taylor Company produces two industrial cleansers that use the same liquid chemical input: Pocolimpio...

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Taylor Company produces two industrial cleansers that use the same liquid chemical input: Pocolimpio and Maslimpio. Pocolimpio uses two quarts of the chemical for every unit produced, and Maslimpio uses five quarts. Currently, Taylor has 6,000 quarts of the material in inventory. All of the material is imported. For the coming year, Taylor plans to import 6,000 quarts to produce 1,000 units of Pocolimpio and 2,000 units of Maslimpio. The detail of each products unit contribution margin is as follows: Taylor Company has received word that the source of the material has been shut down by embargo. Consequently, the company will not be able to import the 6,000 quarts it planned to use in the coming years production. There is no other source of the material. Required: 1. Compute the total contribution margin that the company would earn if it could import the 6,000 quarts of the material. 2. Determine the optimal usage of the companys inventory of 6,000 quarts of the material. Compute the total contribution margin for the product mix that you recommend. 3. Assume that Pocolimpio uses three direct labor hours for every unit produced and that Maslimpio uses two hours. A total of 6,000 direct labor hours is available for the coming year. a. Formulate the linear programming problem faced by Taylor Company. To do so, you must derive mathematical expressions for the objective function and for the materials and labor constraints. b. Solve the linear programming problem using the graphical approach. c. Compute the total contribution margin produced by the optimal mix.
Zippy Inc. manufactures a fuel additive, Surge, which has a stable selling price of 44 per drum. The company has been producing and selling 80,000 drums per month. In connection with your examination of Zippys financial statements for the year ended September 30, management has asked you to review some computations made by Zippys cost accountant. Your working papers disclose the following about the companys operations: Standard costs per drum of product manufactured: Materials: Costs and expenses during September: Chemicals: 645,000 gallons purchased at a cost of 1,140,000; 600,000 gallons used. Empty drums: 94,000 purchased at a cost of 94,000; 80,000 drums used. Direct labor: 81,000 hours worked at a cost of 816,480. Factory overhead: 768,000. Required: Calculate the following for September, using the formulas on pages 421422 and 424 (Round unit costs to the nearest whole cent and compute the materials variances for both Surge and for the drums.): 1. Materials quantity variance. 2. Materials purchase price variance. 3. Labor efficiency variance. 4. Labor rate variance.
Panguitch Company manufactures a component for tablet computers. Weight and durability of the component are the two most important quality characteristics for the tablet manufacturers. With respect to the weight dimension, the component has a target value of 100 grams. Specification limits are 100 grams, plus or minus five grams. Products produced at the lower specification limit of 95 grams lose 20. A sample of five units produced the following weight measures: During the first quarter, 100,000 units were produced. Required: 1. Calculate the loss for each unit. Calculate the average loss for the sample of five. 2. Using the average loss, calculate the hidden quality costs for the first quarter. 3. Durability is another important quality characteristic. The target value is 20,000 hours of operation before failure. The lower specification limit set by engineering and marketing is 19,000 hours. They agreed that there should be no upper specification limit. They also noted that there is a 750 loss at the lower specification limit. Explain why there would be no upper specification limit. Use the lower limit and the left half of the Taguchi quadratic loss function to estimate the loss for components with the following lives: 6,500 hours, 11,000 hours, and 15,500 hours. What does this reveal about the importance of durability?
Pinter Company had the following environmental activities and product information: 1. Environmental activity costs 2. Driver data 3. Other production data Required: 1. Calculate the activity rates that will be used to assign environmental costs to products. 2. Determine the unit environmental and unit costs of each product using ABC. 3. What if the design costs increased to 360,000 and the cost of toxic waste decreased to 750,000? Assume that Solvent Y uses 6,000 out of 12,000 design hours. Also assume that waste is cut by 50 percent and that Solvent Y is responsible for 14,250 of 15,000 pounds of toxic waste. What is the new environmental cost for Solvent Y?
Addis Labs, Inc., produces various chemical compaounds for iindustrial use. One compound, called Fludex, is prepared using an elaborate distilling process. The company has developed standard coasts for one unit of Fludex, as follows: Standard Quantity or Hour Standard price or rate Standard cost Direct materials 2.5 ounces ETB 20.00 per ounces ETB 50.00 Direct labor 1.4 hours ETB 12.50 per ounces ETB 17.50 Variable manufacturing overhead 1.4 hours ETB 3.50 per ounces ETB 4.90 ETB 72.40 During November, the following activity was recorded by the company relative to production of Fludex: Materials purchased 12,000 ounces at a cost of ETB 225,000. There was no beginning inventory of materials; however, at the end of the month, 2,500 ounces of material remained in ending The company employs 35 lab technicians to work on the production of F During November, each worked an average of 160 hours at an average rate of ETB 12 per…
Becton Labs, Inc., produces various chemical compounds for industrial use. One compound, called Fludex, is prepared using an elaborate distilling process. The company has developed standard costs for one unit of Fludex, as follows: Standard Quantityor Hours Standard Priceor Rate Standard Cost Direct materials 2.50 ounces $ 28.00 per ounce $ 70.00 Direct labor 0.50 hours $ 13.00 per hour 6.50 Variable manufacturing overhead 0.50 hours $ 3.60 per hour 1.80 Total standard cost per unit $ 78.30 During November, the following activity was recorded related to the production of Fludex: Materials purchased, 13,500 ounces at a cost of $361,800. There was no beginning inventory of materials; however, at the end of the month, 2,900 ounces of material remained in ending inventory. The company employs 21 lab technicians to work on the production of Fludex. During November, they each worked an average of 140 hours at an average pay rate of $11.50 per hour.…
Becton Labs, Inc., produces various chemical compounds for industrial use. One compound, called Fludex, is prepared using an elaborate distilling process. The company has developed standard costs for one unit of Fludex, as follows: Standard Quantityor Hours Standard Priceor Rate Standard Cost Direct materials 2.40 ounces $ 21.00 per ounce $ 50.40 Direct labor 0.80 hours $ 15.00 per hour 12.00 Variable manufacturing overhead 0.80 hours $ 3.50 per hour 2.80 Total standard cost per unit $ 65.20 During November, the following activity was recorded related to the production of Fludex: Materials purchased, 13,500 ounces at a cost of $266,625. There was no beginning inventory of materials; however, at the end of the month, 4,200 ounces of material remained in ending inventory. The company employs 24 lab technicians to work on the production of Fludex. During November, they each worked an average of 140 hours at an average pay rate of $14.50 per…
Becton Labs, Inc., produces various chemical compounds for industrial use. One compound, called Fludex, is prepared using an elaborate distilling process. The company has developed standard costs for one unit of Fludex, as follows: Standard Quantityor Hours Standard Priceor Rate Standard Cost Direct materials 2.00 ounces $ 21.00 per ounce $ 42.00 Direct labor 0.90 hours $ 12.00 per hour 10.80 Variable manufacturing overhead 0.90 hours $ 2.00 per hour 1.80 Total standard cost per unit $ 54.60 During November, the following activity was recorded related to the production of Fludex: Materials purchased, 10,000 ounces at a cost of $197,000. There was no beginning inventory of materials; however, at the end of the month, 2,550 ounces of material remained in ending inventory. The company employs 24 lab technicians to work on the production of Fludex. During November, they each worked an average of 170 hours at an average pay rate of $11.50 per…
Huron Company produces a commercial cleaning compound known as Zoom. The direct materials and direct labor standards for one unit of Zoom are given below: Standard quantity or hours of direct materials: 7.40 pounds, standard price or rate of direct materials is 2.60 per pound. Standard cost of direct materials is 19.24. Standard quality or hours of direct labor is 0.45. Standard price or rate of direct labor is 8.00 per pound. Standard cost is 3.60. During the most recent month, the following activity was recorded: 12,100 pounds of material were purchased at a cost of 2.50 per pound. All of the material purchased was used to produce 1,500 units of the product. 575 hours of direct labor time were recorded at a total labor cost of 5,750. Compute the materials price variance and the materials quantity variance for the month. Complete the labor rate variance and efficiency variance for the month.
Becton Labs, Inc., produces various chemical compounds for industrial use. One compound, called Fludex, is prepared using an elaborate distilling process. The company has developed standard costs for one unit of Fludex, as follows: Standard Quantity or Hours Standard Price or Rate Standard Cost Direct materials 2.00 ounces $ 21.00 per ounce $ 42.00 Direct labor 0.90 hours $ 12.00 per hour 10.80 Variable manufacturing overhead 0.90 hours $ 2.00 per hour 1.80 Total standard cost per unit $ 54.60 During November, the following activity was recorded related to the production of Fludex: Materials purchased, 10,000 ounces at a cost of $197,000. There was no beginning inventory of materials; however, at the end of the month, 2,550 ounces of material remained in ending inventory. The company employs 24 lab technicians to work on the production of Fludex. During November, they each worked an average of 170 hours at an average pay rate of $11.50 per hour. Variable manufacturing overhead is…
Becton Labs, Incorporated, produces various chemical compounds for industrial use. One compound, called Fludex, is prepared using an elaborate distilling process. The company has developed standard costs for one unit of Fludex, as follows: Standard Quantity or Hours Standard Price or Rate Standard Cost Direct materials 2.00 ounces $ 30.00 per ounce $ 60.00 Direct labor 0.50 hours $ 14.00 per hour 7.00 Variable manufacturing overhead 0.50 hours $ 3.40 per hour 1.70 Total standard cost per unit $ 68.70 During November, the following activity was recorded related to the production of Fludex: Materials purchased, 10,000 ounces at a cost of $287,000. There was no beginning inventory of materials; however, at the end of the month, 3,000 ounces of material remained in ending inventory. The company employs 20 lab technicians to work on the production of Fludex. During November, they each worked an average of 130 hours at an average pay rate of $12.00 per hour.…
Becton Labs, Incorporated, produces various chemical compounds for industrial use. One compound, called Fludex, is prepared using an elaborate distilling process. The company has developed standard costs for one unit of Fludex, as follows: Standard Quantity or Hours Standard Price or Rate Standard Cost Direct materials 2.00 ounces $ 30.00 per ounce $ 60.00 Direct labor 0.50 hours $ 14.00 per hour 7.00 Variable manufacturing overhead 0.50 hours $ 3.40 per hour 1.70 Total standard cost per unit $ 68.70 During November, the following activity was recorded related to the production of Fludex: Materials purchased, 10,000 ounces at a cost of $287,000. There was no beginning inventory of materials; however, at the end of the month, 3,000 ounces of material remained in ending inventory. The company employs 20 lab technicians to work on the production of Fludex. During November, they each worked an average of 130 hours at an average pay rate of $12.00 per hour.…