Problem 13: Jimmy Company manufactures a hand soap. The company employs both skilled and unskilled workers. To produce one 55-gallon drum of soap requires Materials A. and B as well as skilled labor and unskilled labor. The standard and actual material and labor information is presented below: Standard: Material A: 30.25 gallons @ P1.25 per gallon Material B: 24.75 gallons @ P2.00 per gallon Skilled Labor: 4 hours @ P12 per hour Unskilled Labor: 2 hours @ P 7 per hour Actual: Material A: 10,716 gallons purchased and used @ P1.50 per gallon Material B: 17,484 gallons purchased and used @ P1.90 per gallon Skilled labor hours: 1,950 @ P11.90 per hour Unskilled labor hours: 1,300 @ P7.15 per hour During the current month Jimmy Company manufactured 500 55-gallon drums.

Problem 13: Jimmy Company manufactures a hand soap. The company employs both skilled and unskilled workers. To produce one 55-gallon drum of soap requires Materials A. and B as well as skilled labor and unskilled labor. The standard and actual material and labor information is presented below: Standard: Material A: 30.25 gallons @ P1.25 per gallon Material B: 24.75 gallons @ P2.00 per gallon Skilled Labor: 4 hours @ P12 per hour Unskilled Labor: 2 hours @ P 7 per hour Actual: Material A: 10,716 gallons purchased and used @ P1.50 per gallon Material B: 17,484 gallons purchased and used @ P1.90 per gallon Skilled labor hours: 1,950 @ P11.90 per hour Unskilled labor hours: 1,300 @ P7.15 per hour During the current month Jimmy Company manufactured 500 55-gallon drums.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 1MC: Active Frame, Inc., manufactures clear and tinted sport glasses. The manufacturing of clear glasses...

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Use the following information for Exercises 5-44 through 5-46: The following six situations at Diviney Manufacturing Inc. are independent. a. A manual insertion process takes 30 minutes and 8 pounds of material to produce a product. Automating the insertion process requires 15 minutes of machine time and 7.5 pounds of material. The cost per labor hour is 12, the cost per machine hour is 8, and the cost per pound of materials is 10. b. With its original design, a gear requires 8 hours of setup time. By redesigning the gear so that the number of different grooves needed is reduced by 50%, the setup time is reduced by 75%. The cost per setup hour is 50. c. A product currently requires 6 moves. By redesigning the manufacturing layout, the number of moves can be reduced from 6 to 0. The cost per move is 20. d. Inspection time for a plant is 16,000 hours per year. The cost of inspection consists of salaries of 8 inspectors, totaling 320,000. Inspection also uses supplies costing 5 per inspection hour. The company eliminated most defective components by eliminating low-quality suppliers. The number of production errors was reduced dramatically by installing a system of statistical process control. Further quality improvements were realized by redesigning the products, making them easier to manufacture. The net effect was to achieve a close to zero-defect state and eliminate the need for any inspection activity. e. Each unit of a product requires 6 components. The average number of components is 6.5 due to component failure, requiring rework and extra components. Developing relations with the right suppliers and increasing the quality of the purchased component can reduce the average number of components to 6 components per unit. The cost per component is 500. f. A plant produces 100 different electronic products. Each product requires an average of 8 components that are purchased externally. The components are different for each part. By redesigning the products, it is possible to produce the 100 products so that they all have 4 components in common. This will reduce the demand for purchasing, receiving, and paying bills. Estimated savings from the reduced demand are 900,000 per year. 5-44 Nonvalue-Added Costs Refer to the information for Diviney Manufacturing on the previous page. Required: Estimate the nonvalue-added cost for each situation.
Use the following information for Brief Exercises 2-19 and 2-20: Slapshot Company makes ice hockey sticks. Last week, direct materials (wood, paint, Kevlar, and resin) costing 32,000 were put into production. Direct labor of 28,000 (10 workers 200 hours 14 per hour) was incurred. Manufacturing overhead equaled 60,000. By the end of the week, the company had manufactured 500 hockey sticks. Brief Exercise 2-19 Total Product Cost and Per-Unit Product Cost Refer to the information for Slapshot Company above. Required: 1. Calculate the total product cost for last week. 2. Calculate the per-unit cost of one hockey stick that was produced last week.
Active Frame, Inc., manufactures clear and tinted sport glasses. The manufacturing of clear glasses takes 45,000 direct labor hours and involves 1,700 parts and 115 inspections. The manufacturing of tinted glasses takes 115,000 direct labor hours and involves 1,400 parts and 450 inspections. The traditional method applies $560,000 of overhead on the basis of direct labor hours. What is the amount of overhead per direct labor hour applied to the clear glass products? A. $933.33 B. $157,500 C. $322.500 D. $402,500
Caseys Kitchens makes two types of food smokers: Gas and Electric. The company expects to manufacture 20,000 units of Gas smokers, which have a per-unit direct material cost of $15 and a per-unit direct labor cost of $25. k also expects to manufacture 50,000 units of Electric smokers, which have a per-unit material cost of $20 and a per-unit direct labor cost of $45. Historically, it has used the traditional allocation method and applied overhead at a rate of $125 per machine hour. It was determined that there were three cost pools, and the overhead for each cost pool is as follows: The cost driver for each cost pool and its expected activity is as follows: A. What is the per-unit cost for each product under the traditional allocation method? B. What is the per-unit cost for each product under ABC costing? C. Compared to ABC costing, was each products overhead under- or over applied? D. How much was overhead under- or over applied for each product?
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Bountiful Manufacturing produces two types of bike frames (Frame X and Frame Y). Frame X passes through four processes: cutting, welding, polishing, and painting. Frame Y uses three of the same processes: cutting, welding, and painting. Each of the four processes employs 10 workers who work eight hours each day. Frame X sells for 40 per unit, and Frame Y sells for 55 per unit. Materials is the only unit-level variable expense. The materials cost for Frame X is 20 per unit, and the materials cost for Frame Y is 25 per unit. Bountifuls accounting system has provided the following additional information about its operations and products: Bountifuls management has determined that any production interruptions can be corrected within two days. Required: 1. Assuming that Bountiful can meet daily market demand, compute the potential daily profit. Now, compute the minutes needed for each process to meet the daily market demand. Can Bountiful meet daily market demand? If not, where is the bottleneck? Can you derive an optimal mix without using a graphical solution? If so, explain how. 2. Identify the objective function and the constraints. Then, graph the constraints facing Bountiful. Determine the optimal mix and the maximum daily contribution margin (throughput). 3. Explain how a drum-buffer-rope system would work for Bountiful. 4. Suppose that the Engineering Department has proposed a process design change that will increase the polishing time for Frame X from 15 to 23 minutes per unit and decrease the welding time from 15 minutes to 10 minutes per unit (for Frame X). The cost of process redesign would be 10,000. Evaluate this proposed change. What step in the TOC process does this proposal represent?
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Production run size and activity improvement Littlejohn, Inc. manufactures machined parts for the automotive industry. The activity cost associated with Part XX-10 is as follows: Activity Activity-Base Usage Activity Rate = Activity Cost Fabrication 250 dlh 80per dlh 20,000 Setup 10 setups 80 per setup 800 Production control 10 prod, runs 30 per prod, run 300 Moving 10 moves 25 per move 250 Total activity cost per unit 21,350 Estimated units of production 500 Activity cost per unit 42.70 Each unit requires 30 minutes of fabrication direct labor. Moreover, part XX-10 is manufactured in production run sizes of 50 units. Each production run is set up, scheduled (production control), and moved as a batch of 50 units. Management is considering improvements in the setup, production control, and moving activities in order to cut the production run sizes by half. As a result, the number of setups, production runs, and mows will double from 10 to 20. Such improvements are expected to speed the companys ability to respond to customer orders. Setup is reengineered so that it takes 60% of the original cost per setup. Production control software will allow production control effort and cost per production run to decline by 60%. Moving distance was reduced by 40%, thus reducing the cost per mow by the same amount. A. Determine the revised activity cost per unit under the proposed changes. B. Did these improvements reduce the activity cost per unit? C. What cost per unit for setup would be required for the solution in (A) to equal the base solution?
Use the following information for Brief Exercises 2-19 and 2-20: Slapshot Company makes ice hockey sticks. Last week, direct materials (wood, paint, Kevlar, and resin) costing 32,000 were put into production. Direct labor of 28,000 (10 workers 200 hours 14 per hour) was incurred. Manufacturing overhead equaled 60,000. By the end of the week, the company had manufactured 500 hockey sticks. Brief Exercise 2-20 Prime Cost and Conversion Cost Refer to the information for Slapshot Company on the previous page. Required: 1. Calculate the total prime cost for last week. 2. Calculate the per-unit prime cost. 3. Calculate the total conversion cost for last week. 4. Calculate the per-unit conversion cost.
Part 1 Liverpool Manufacturing Limited Liverpool Manufacturing Limited developed the following standard costs for direct material and direct labour for one of their major products, the 45 litres heavy-duty plastic container. Each container requires the following: Types of Cost Standard quantity Standard price Direct materials 0.2 kilos £30 per kilo Direct labour 0.1 hours £17 per hour During June, Liverpool Manufacturing Limited produced and sold 10,000 containers using 2,100 kilos of direct materials at an average cost per kilo of £25 and 1,100 direct labour hours at an average wage of £16 per hour. Required: a) Calculate the following variances for June: i. Direct material price variance ii. Direct material quantity variance iv. Direct labour rate variance v. Direct labour efficiency variance
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