14-1. Planning Manpower and Labor Costs. Virontrol, Inc. is a relatively newcompany in the environmental control industry and is experiencing tremendousgrowth in product demand. To meet customers' increasing demands, the man-agement is considering the addition of a nighttime operation production shiftbeginning October 1.Production takes place in three departments: Assembly, Molding, andFinishing. Standard time in the Molding Department is 10 minutes per unitproduced, while the Finishing Department averages 1212 items per hour. Em-ployees in these two departments are paid $5 per hour. Two people are neededin the Assembly Department, each with a monthly salary of $850, to serve theextra shift. One foreman for each 19 workers is needed in the Molding andFinishing Departments, and 5 cleanup employees are required. Foremen are paid$1,200 per month, and each member of the cleanup crew is paid $3.50 per hour.Under normal conditions, the company schedules 20 work days per monthwith standard monthly production of 120,000 units.Required: A monthly labor budget for the extra shift, showing the timerequired in each department, the labor cost for each department and service,unit labor cost, and the number of employees required.

A monthly labor budget for an extra shift outlines the anticipated costs and workforce requirements…

Required: A monthly labor budget for the extra shift, showing the time required in each department, the labor cost for each department and service, unit labor cost, and the number of employees required.

Required: A monthly labor budget for the extra shift, showing the time required in each department, the labor cost for each department and service, unit labor cost, and the number of employees required.

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 27P: Calen Company manufactures and sells three products in a factory of three departments. Both labor...

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Calen Company manufactures and sells three products in a factory of three departments. Both labor and machine time are applied to the products as they pass through each department. The nature of the machine processing and of the labor skills required in each department is such that neither machines nor labor can be switched from one department to another. Calens management is attempting to plan its production schedule for the next several months. The planning is complicated by the fact that labor shortages exist in the community and some machines will be down several months for repairs. Following is information regarding available machine and labor time by department and the machine hours and direct labor hours required per unit of product. These data should be valid for at least the next six months. Calen believes that the monthly demand for the next six months will be as follows: Inventory levels will not be increased or decreased during the next six months. The unit cost and price data for each product are as follows: Required: 1. Calculate the monthly requirement for machine hours and direct labor hours for producing Products 401, 402, and 403 to determine whether or not the factory can meet the monthly sales demand. 2. Determine the quantities of 401, 402, and 403 that should be produced monthly to maximize profits. Prepare a schedule that shows the contribution to profits of your product mix. 3. Assume that the machine hours available in Department 3 are 1,500 instead of 2,700. Calculate the optimal monthly product mix using the graphing approach to linear programming. Prepare a schedule that shows the contribution to profits from this optimal mix. (CMA adapted)
Douglas Davis, controller for Marston, Inc., prepared the following budget for manufacturing costs at two different levels of activity for 20X1: During 20X1, Marston worked a total of 80,000 direct labor hours, used 250,000 machine hours, made 32,000 moves, and performed 120 batch inspections. The following actual costs were incurred: Marston applies overhead using rates based on direct labor hours, machine hours, number of moves, and number of batches. The second level of activity (the right column in the preceding table) is the practical level of activity (the available activity for resources acquired in advance of usage) and is used to compute predetermined overhead pool rates. Required: 1. Prepare a performance report for Marstons manufacturing costs in the current year. 2. Assume that one of the products produced by Marston is budgeted to use 10,000 direct labor hours, 15,000 machine hours, and 500 moves and will be produced in five batches. A total of 10,000 units will be produced during the year. Calculate the budgeted unit manufacturing cost. 3. One of Marstons managers said the following: Budgeting at the activity level makes a lot of sense. It really helps us manage costs better. But the previous budget really needs to provide more detailed information. For example, I know that the moving materials activity involves the use of forklifts and operators, and this information is lost when only the total cost of the activity for various levels of output is reported. We have four forklifts, each capable of providing 10,000 moves per year. We lease these forklifts for five years, at 10,000 per year. Furthermore, for our two shifts, we need up to eight operators if we run all four forklifts. Each operator is paid a salary of 30,000 per year. Also, I know that fuel costs about 0.25 per move. Assuming that these are the only three items, expand the detail of the flexible budget for moving materials to reveal the cost of these three resource items for 20,000 moves and 40,000 moves, respectively. Based on these comments, explain how this additional information can help Marston better manage its costs. (Especially consider how activity-based budgeting may provide useful information for non-value-added activities.)
Handbrain Inc. is considering a change to activity-based product costing. The company produces two products, cell phones and tablet PCs, in a single production department. The production department is estimated to require 2,000 direct labor hours. The total indirect labor is budgeted to be 200,000. Time records from indirect labor employees revealed that they spent 30% of their time setting up production runs and 70% of their time supporting actual production. The following information about cell phones and tablet PCs was determined from the corporate records: a. Determine the indirect labor cost per unit allocated to cell phones and tablet PCs under a single plantwide factory overhead rate system using the direct labor hours as the allocation base. b. Determine the budgeted activity costs and activity rates for the indirect labor under activity-based costing. Assume two activitiesone for setup and the other for production support. c. Determine the activity cost per unit for indirect labor allocated to each product under activity-based costing. d. Why are the per-unit allocated costs in (a) different from the per-unit activity cost assigned to the products in (c)?
Patterson Corporation expects to incur 70,000 of factory overhead and 60,000 of general and administrative costs next year. Direct labor costs at 5 per hour are expected to total 50,000. If factory overhead is to be applied per direct labor hour, how much overhead will be applied to a job incurring 20 hours of direct labor? a. 120 b. 260 c. 28 d. 140
17-47 Benchmarking, ethics. Amanda McNall is the corporate controller of Scott Quarry. Scott Quarry operates 12 rock-crushing plants in Scott County, Kentucky, that process huge chunks of limestone rock extracted from underground mines. Given the competitive landscape for pricing, Scott’s managers pay close attention to costs. Each plant uses a process-costing system, and at the end of every quarter, each plant manager submits a production report and a production-cost report. The production report includes the plant manager’s estimate of the percentage of completion of the ending work in process as to direct materials and conversion costs, as well as the level of processed limestone inventory. McNall uses these estimates to compute the cost per equivalent unit of work done for each input for the quarter. Plants are ranked from 1 to 12, and the three plants with the lowest cost per equivalent unit for direct materials and conversion costs are each given a bonus and recognized in the…
A small manufacturer of small metal components is planning its production for next month. The company has two products, Product A and Product B. Profit for Product A is $64per case, and profit for Product B is $87 per case. The three main departments at the manufacturing plant are cutting, trimming, and coating. In the production process, metal bars are first cut to the proper length, then trimmed to the desired angle, then coated with corrosive protection. Each production department works two8-hour shifts, 5days per week. The production rates for parts in each production department are shown below Production Rates(cases/shift) Cutting Trimming Coating Product A 3.2 2.0 0 Product B 2.5 4.0 1.0 How many cases of each product should be produced per week to maximize profits?
Fermi Company decided to look more closely at the materials receiving activity in its factory. The driver for receiving is the number of receiving orders. The following information for a year was collected: Demand for receiving orders: 130,000 Resources needed: a. 6 workers capable of completing 25,000 receiving orders per year. (The completion of a receiving order requires unloading the materials onto the receiving dock, checking the receiving order against the purchase order and invoice, and carrying the materials to the materials storeroom.) Salary is $27,000 for each worker b. Supplies (paper, grease markers, small tools, rags) expected to cost $0.80 per receiving order c. Workbenches, dollies, computers, etc.; depreciation $14,400 per year d. Space for the receiving dock, utilities; $9,800 per year Required: 1. Prepare a static budget for the receiving activity for the year. 2. Calculate the cost per receiving order based on annual demand for receiving
The normal capacity of the Cutting Department is 12,000 machine hours per month. At normal capacity, the standard factory overhead rate is P12.50 per machine hour based on P96,000 budgeted fixed cost per month and a variable cost rate of P4.50 per machine hour. During May, the department operated at 12,500 machine hours, with actual factory overhead of P166,000. The number of standard machine hours allowed for the production actually attained is 11,000.The controllable variance and volume variance, respectively, are
Farnsworth Company has gathered data on its overhead activities and associated costs for the past 10 months. Tracy Heppler, a member of the controller's department, has convinced management that overhead costs can be better estimated and controlled if the fixed and variable components of each overhead activity are known. One such activity is receiving raw materials (unloading incoming goods, counting goods, and inspecting goods), which she believes is driven by the number of receiving orders. Ten months of data have been gathered for the receiving activity and are as follows: Month Receiving Orders Receiving Cost $ 1 1,000 18,000 2 700 15,000 3 1,500 28,000 4 1,200 17,000 5 1,300 25,000 6 1,100 21,000 7 1,600 29,000 8 1,400 24,000 9 1,700 27,000 10 900 16,000 Assume that Tracy has used the method of least squares on the receiving data and has gotten the following results: Intercept 3,212…
Simms Realtors, a real state consulting firm, specializes in advising companies on potential new plant sites. The company uses a job order costing system with a predetermined indirect cost allocation rate, computed as a percentage of direct labor costs. At the beginning of 2011, managing partner Debra Simms prepared the following budget for the year: Direct labor hours (professional) 14,000 hours Direct labor costs (professional) $2,150,000 Office rent 260,000 Support staff sallaries 850,000 Utilities 350,000 Maynard Manufacturing, Inc. is inviting several consultants to bid for work. Debra Simms estimated that this Job will require about 260 direct labor hours. Compute Simms' Relators' indirect cost allocation rate.
Tannin Products Inc. prepared the following factory overhead cost budget for the Trim Department for July of the current year, during which it expected to use 20,000 hours for production: Variable overhead costs: Indirect factory labor $46,000 Power and light 12,000 Indirect materials 20,000 Total variable overhead cost $78,000 Fixed overhead costs: Supervisory salaries $54,500 Depreciation of plant and equipment 40,000 Insurance and property taxes 35,500 Total fixed overhead cost 130,000 Total factory overhead cost $208,000 Tannin has available 25,000 hours of monthly productive capacity in the Trim Department under normal business conditions. During July, the Trim Department actually used 22,000 hours for production. The actual fixed costs were as budgeted. The actual variable overhead for July was as follows: Actual variable factory overhead costs: Indirect factory labor $49,700 Power and light 13,000 Indirect…
Hagerty, Inc. a manufacturer of computer diskettes, currently uses a conventional process cost system. During February, Hagerty plans to purchase P 50,000 of raw materials. Of this amount 80% will be used for current production, while the remainder will serve as a buffer in inventory. Direct labor cost is expected to be P 10,000 During February, and the actual factory overhead is anticipated to total P 65,000. Paul William, the owner, has been considering the use of a JIT inventory system. If implemented at the beginning of February, only the materials needed for current production would be purchased. Requirements: Using T-accounts, enter the February transactions for the purchase and usage of materials under: a) Conventional Costing b) JIT Costing Using T-accounts, enter the February transactions for the labor and overhead costs under: a) Conventional Costing b) JIT Costing Do not record the entry for applied overhead.