please solve within 30 minutes. Marin Company produces two software products (Cloud-X and Cloud-Y) in two separate departments (A and B). Theseproducts are highly regarded network maintenance programs. Cloud-X is used for small networks and Cloud-Y is used forlarge networks. Marin is known for the quality of its products and its ability to meet dates promised for software upgrades.Department A produces Cloud-X, and department B produces Cloud-Y. The production departments are supported by twosupport departments, systems design and programming services. The sources and uses of the support department timeare summarized as follows:FromDesign Programming5,000400Labor and materials (all variable)Depreciation and other fixed costs.TotalToDesignProgrammingThe costs in the two service departments are as follows:Department A Department B1,000600a. Direct Methodb. Step Method (Design Department goes first)c. The Reciprocal Method (using Solver)Design$ 74,00054,400$ 128,400Department A9,0001,000Programming$ 50,4004,000$ 54,400Required:1. Determine the total support costs allocated to each of the producing departments using (a) the direct method, (b) the step method(design department goes first), and (c) the reciprocal method. (Do not round intermediate calculations. Round your final answers tonearest whole dollar amount.)Department B$$$TotalLaborHours15,0002,000Total000

Lets understand the basics. In direct method, cost of service departments are directly allocated to…

Marin Company produces two software products (Cloud-X and Cloud-Y) in two separate departments (A and B). These products are highly regarded network maintenance programs. Cloud-X is used for small networks and Cloud-Y is used for large networks. Marin is known for the quality of its products and its ability to meet dates promised for software upgrades. Department A produces Cloud-X, and department B produces Cloud-Y. The production departments are supported by two support departments, systems design and programming services. The sources and uses of the support department time are summarized as follows: To Total Labor

Marin Company produces two software products (Cloud-X and Cloud-Y) in two separate departments (A and B). These products are highly regarded network maintenance programs. Cloud-X is used for small networks and Cloud-Y is used for large networks. Marin is known for the quality of its products and its ability to meet dates promised for software upgrades. Department A produces Cloud-X, and department B produces Cloud-Y. The production departments are supported by two support departments, systems design and programming services. The sources and uses of the support department time are summarized as follows: To Total Labor

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter15: Lean Accounting And Productivity Measurement

Section: Chapter Questions

Problem 1CE: Anderson Company has the following departmental manufacturing structure for one of its products:...

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Marin Company produces two software products (Cloud-X and Cloud-Y) in two separate departments (A and B). These products are highly regarded network maintenance programs. Cloud-X is used for small networks and Cloud-Y is used for large networks. Marin is known for the quality of its products and its ability to meet dates promised for software upgrades. Department A produces Cloud-X, and department B produces Cloud-Y. The production departments are supported by two support departments, systems design and programming services. The sources and uses of the support department time are summarized as follows: 1. Determine the total support costs allocated to each of the producing departments using (a) the direct method, (b) the step method (design department goes first), and (c) the reciprocal method.
H inc manufactures equipment for metal testing. It also manufactures the electronicchips that go into the manufacture of the testing equipment.The company has a well-established cost and management accounting system. The costaccounting system records the actual manufacturing costs for the electronic chips and thetesting equipment, and also produces standard unit costs for the purposes of budgeting andvariance analysis.The management accountant of H Inc is pleased with themanagement information system that is in place within the company, and is particularlyproud of the budgetary control reporting system that provides monthly control reports tothe board within one week of the end of each month.The market for metal testing equipment is growing at a reasonable rate, but there are threeother competitors in the market. Competition between them is strong and consequentlyprofit margins are fairly low at the moment, although H Inc is operating at a profit.H Inc senior management are not sure…
JCL Inc. is a major chip manufacturing firm that sells its products to computer manufacturers like Dell, Gateway, and others. In simplified terms, chip making at JCL Inc. involves three basic operations: depositing, patterning, and etching. • Depositing: Using chemical vapor deposition (CVD) technology, an insulating material is deposited on the wafer surface, forming a thin layer of solid material on the chip. • Patterning: Photolithography projects a microscopic circuit pattern on the wafer surface, which has a light-sensitive chemical like the emulsion on photographic film. It is repeated many times as each layer of the chip is built. • Etching: Etching removes selected material from the chip surface to create the device structures. Table 7.4 lists the required processing times and setup times at each of the steps. There is unlimited space for buffer inventory between these steps. Assume that the unit of production is a wafer, from which individual chips are cut at a later stage.a.…
CHS is a large multidivision firm. One division, Health Services, is well known inside CHS for its efficient information technology (IT). A smaller division, Optics, has approached Health Services with a proposal that it provide IT support in the form of machine time for some of Optics’s billing and administrative work. After an analysis of the demands that Optics would place on the system, the IT manager of Health Services notes that Health Services would have to lease a new server because of the additional load. The lease rates for the current server are a fixed annual lease of $4,200 and it averages machine time of 3,800 hours annually. The new server leases for an annual rate of $6,900. Because the new server is a faster machine, Health Services can complete its current requirements in only 2,450 hours. The work for Optics is estimated to be 2,000 hours. In addition to leasing a new server, there are two other changes Health Services would have to make in IT. First, it will…
Kagle 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?
John Thomas, vice president of Mallett Company (a producer of a variety of plastic products), has been supervising the implementation of an ABC management system. John wants to improve process efficiency by improving the activities that define the processes. To illustrate the potential of the new system to the president, John has decided to focus on two processes: production and customer service. Within each process, one activity will be selected for improvement: materials usage for production and sustaining engineering for customer service (sustaining engineers are responsible for redesigning products based on customer needs and feedback). Value-added standards are identified for each activity. For materials usage, the value-added standard calls for six pounds per unit of output (the products differ in shape and function, but their weight is uniform). The value-added standard is based on the elimination of all waste due to defective molds. The standard price of materials is 5 per pound. For sustaining engineering, the standard is 58% of current practical activity capacity. This standard is based on the fact that about 42% of the complaints have to do with design features that could have been avoided or anticipated by the company. Current practical capacity (at the end of 20X1) is defined by the following requirements: 6,000 engineering hours for each product group that has been on the market or in development for 5 years or less and 2,400 hours per product group of more than 5 years. Four product groups have less than 5 years experience, and 10 product groups have more. Each of the 24 engineers is paid a salary of 60,000. Each engineer can provide 2,000 hours of service per year. No other significant costs are incurred for the engineering activity. Actual materials usage for 20X1 was 25% above the level called for by the value-added standard; engineering usage was 46,000 hours. A total of 80,000 units of output were produced. John and the operational managers have selected some improvement measures that promise to reduce nonvalue-added activity usage by 40% in 20X2. Selected actual results achieved for 20X2 are as follows: The actual prices paid for materials and engineering hours are identical to the standard or budgeted prices. Required: 1. For 20X1, calculate the nonvalue-added usage and costs for materials usage and sustaining engineering. 2. CONCEPTUAL CONNECTION Using the budgeted improvements, calculate the expected activity usage levels for 20X2. Now, compute the 20X2 usage variances (the difference between the expected and actual values), expressed in both physical and financial measures, for materials and engineering. Comment on the companys ability to achieve its targeted reductions. In particular, discuss what measures the company must take to capture any realized reductions in resource usage.
Reducir, Inc., produces two different types of hydraulic cylinders. Reducir produces a major subassembly for the cylinders in the Cutting and Welding Department. Other parts and the subassembly are then assembled in the Assembly Department. The activities, expected costs, and drivers associated with these two manufacturing processes are given below. Note: In the assembly process, the materials-handling activity is a function of product characteristics rather than batch activity. Other overhead activities, their costs, and drivers are listed below. Other production information concerning the two hydraulic cylinders is also provided: Required: 1. Using a plantwide rate based on machine hours, calculate the total overhead cost assigned to each product and the unit overhead cost. 2. Using activity rates, calculate the total overhead cost assigned to each product and the unit overhead cost. Comment on the accuracy of the plantwide rate. 3. Calculate the global consumption ratios. 4. Calculate the consumption ratios for welding and materials handling (Assembly) and show that two drivers, welding hours and number of parts, can be used to achieve the same ABC product costs calculated in Requirement 2. Explain the value of this simplification. 5. Calculate the consumption ratios for inspection and engineering, and show that the drivers for these two activities also duplicate the ABC product costs calculated in Requirement 2.
Bienestar Inc., has the following departmental structure for producing a well-known multivitamin: A consultant designed the following cellular manufacturing structure for the same product: The times above the processes represent the time required to process one unit of product. Required: 1. Calculate the time required to produce a batch of 15 bottles using a batch-processing departmental structure. 2. Calculate the time to process 15 units using cellular manufacturing. 3. How much manufacturing time will the cellular manufacturing structure save for a batch of 15 units?
Code Incorporated has three divisions (Entertainment, Plastics, and Video Card), each of which is considered an investment center for performance evaluation purposes. The Entertainment Division manufactures video arcade equipment using products produced by the other two divisions, as follows: 1. The Entertainment Division purchases plastic components from the Plastics Division that are considered unique (i.e., they are made exclusively for the Entertainment Division). In addition, the Plastics Division makes less-complex plastic components that it sells externally, to other producers. 2. The Entertainment Division purchases, for each unit it produces, a video card from Code's Video Card Division, which also sells this video card externally (to other producers). The per-unit manufacturing costs associated with each of the above two items, as incurred by the Plastic Components Division and the Video Card Division, respectively, are: Plastic Components Video Cards Direct…
Audio Visual Corporation (AVC) manufactures and sells visual display equipment. Headquartered in Boston, it has seven sales offices with nearby warehouses that carry its inventory of new equipment and replacement parts. AVC has a departmentalized manufacturing plant with assembly, maintenance, engineering, scheduling, and cost accounting departments as well as several component parts departments. When management decided to upgrade its AIS, they installed a mainframe at headquarters and local area networks at each sales office. The IS manager and four systems analysts were hired shortly before they integrated the new computer and the existing AIS. The other IS employees have been with the company for years. During its early years, AVC had a centralized decision-making organization. Top management formulated all plans and directed all operations. As the company expanded, decision making was decentralized, although data processing was highly centralized. Departments coordinated their…
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…
Sembotix Company has several divisions including a Semiconductor Division that sells semiconductors to both internal and external customers. The company’s X-ray Division uses semiconductors as a component in its final product and is evaluating whether to purchase them from the Semiconductor Division or from an external supplier. The market price for semiconductors is $100 per 100 semiconductors. Dave Bryant is the controller of the X-ray Division, and Howard Hillman is the controller of the Semiconductor Division. The following conversation took place between Dave and Howard: Dave: I hear you are having problems selling semiconductors out of your division. Maybe I can help. Howard: You’ve got that right. We’re producing and selling at about 90% of our capacity to outsiders. Last year, we were selling 100% of capacity. Would it be possible for your division to pick up some of our excess capacity? After all, we are part of the same company. Dave: What kind of price could you give…