Complete all requirements <><> Sensor Systems manufactures an optical switch that it uses in its final product. The switch has the following manufacturing costs per unit:(Click the icon to view the costs.)i (Click the icon to view additional information.)Prepare an outsourcing analysis to determine whether Sensor Systems should make or buy the switch. (For the Difference column, use a minus sign or parentheses only when the cost of outsourcing exceeds the cost of making theswitches in-house.)Variable costs:Direct materialsDirect laborVariable overheadPurchase price from outsiderTotal differential cost per unitexampleOutsourceoptical switch optical switchMakeData tableDirect materialsDirect laborVariable overheadFixed overheadManufacturing product costPrintDoneDifference(Make-Outsource)$10.003.504.008.50$ 26.00X-CMore infoAnother company has offered to sell Sensor Systems the switch for $20.50 perunit. If Sensor Systems buys the switch from the outside supplier, the idlemanufacturing facilities cannot be used for any other purpose, yet none of the fixedcosts are avoidable.PrintDoneXClear allCheck answe

Name: Complete all requirements <><> Sensor Systems manufactures an optical
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Description: Complete all requirements <><> Sensor Systems manufactures an optical switch that it uses in its final product. The switch has the following manufacturing costs per unit:(Click the icon to view the costs.)i (Click the icon to view additional informat

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Sensor Systems manufactures an optical switch that it uses in its final product. The switch has the following manufacturing costs per unit (Click the icon to view the costs.) i (Click the icon to view additional information.) Prepare an outsourcing analysis to determine whether Sensor Systems should make or buy the switch. (For the Difference column, use a minus sign or parentheses only when the cost of outsourcing exceeds the cost of making the switches in-house.) Variable costs: Direct materials Direct labor Variable overhead Purchase price from outsider Outsource optical switch optical switch Make Difference (Make-Outsource) G More info - X Another company has offered to sell Sensor Systems the switch for $20.50 per unit. If Sensor Systems buys the switch from the outside supplier, the idle manufacturing facilities cannot be used for any other purpose, yet none of the fixed costs are avoidable.

Sensor Systems manufactures an optical switch that it uses in its final product. The switch has the following manufacturing costs per unit (Click the icon to view the costs.) i (Click the icon to view additional information.) Prepare an outsourcing analysis to determine whether Sensor Systems should make or buy the switch. (For the Difference column, use a minus sign or parentheses only when the cost of outsourcing exceeds the cost of making the switches in-house.) Variable costs: Direct materials Direct labor Variable overhead Purchase price from outsider Outsource optical switch optical switch Make Difference (Make-Outsource) G More info - X Another company has offered to sell Sensor Systems the switch for $20.50 per unit. If Sensor Systems buys the switch from the outside supplier, the idle manufacturing facilities cannot be used for any other purpose, yet none of the fixed costs are avoidable.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 42P: Good Scent, Inc., produces two colognes: Rose and Violet. Of the two, Rose is more popular. Data...

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Southward Company has implemented a JIT flexible manufacturing system. John Richins, controller of the company, has decided to reduce the accounting requirements given the expectation of lower inventories. For one thing, he has decided to treat direct labor cost as a part of overhead and to discontinue the detailed direct labor accounting of the past. The company has created two manufacturing cells, each capable of producing a family of products: the radiator cell and the water pump cell. The output of both cells is sold to a sister division and to customers who use the radiators and water pumps for repair activity. Product-level overhead costs outside the cells are assigned to each cell using appropriate drivers. Facility-level costs are allocated to each cell on the basis of square footage. The budgeted direct labor and overhead costs are as follows: The predetermined conversion cost rate is based on available production hours in each cell. The radiator cell has 45,000 hours available for production, and the water pump cell has 27,000 hours. Conversion costs are applied to the units produced by multiplying the conversion rate by the actual time required to produce the units. The radiator cell produced 81,000 units, taking 0.5 hour to produce one unit of product (on average). The water pump cell produced 90,000 units, taking 0.25 hour to produce one unit of product (on average). Other actual results for the year are as follows: All units produced were sold. Any conversion cost variance is closed to Cost of Goods Sold. Required: 1. Calculate the predetermined conversion cost rates for each cell. 2. Prepare journal entries using backflush accounting. Assume two trigger points, with completion of goods as the second trigger point. 3. Repeat Requirement 2, assuming that the second trigger point is the sale of the goods. 4. Explain why there is no need to have a work-in-process inventory account. 5. Two variants of backflush costing were presented in which each used two trigger points, with the second trigger point differing. Suppose that the only trigger point for recognizing manufacturing costs occurs when the goods are sold. How would the entries be listed here? When would this backflush variant be considered appropriate?
Abernathy, Inc., produces two different generators and is concerned about their quality. The company has identified the following quality activities and costs associated with the two products: Required: 1. Calculate the quality cost per unit for each product, and break this unit cost into quality cost categories. Which of the two seems to have the lowest quality? 2. How might a manager use the unit quality cost information?
Salem Electronics currently produces two products: a programmable calculator and a tape recorder. A recent marketing study indicated that consumers would react favorably to a radio with the Salem brand name. Owner Kenneth Booth was interested in the possibility. Before any commitment was made, however, Kenneth wanted to know what the incremental fixed costs would be and how many radios must be sold to cover these costs. In response, Betty Johnson, the marketing manager, gathered data for the current products to help in projecting overhead costs for the new product. The overhead costs based on 30,000 direct labor hours follow. (The high-low method using direct labor hours as the independent variable was used to determine the fixed and variable costs.) All depreciation. The following activity data were also gathered: Betty was told that a plantwide overhead rate was used to assign overhead costs based on direct labor hours. She was also informed by engineering that if 20,000 radios were produced and sold (her projection based on her marketing study), they would have the same activity data as the recorders (use the same direct labor hours, machine hours, setups, and so on). Engineering also provided the following additional estimates for the proposed product line: Upon receiving these estimates, Betty did some quick calculations and became quite excited. With a selling price of 26 and just 18,000 of additional fixed costs, only 4,500 units had to be sold to break even. Since Betty was confident that 20,000 units could be sold, she was prepared to strongly recommend the new product line. Required: 1. Reproduce Bettys break-even calculation using conventional cost assignments. How much additional profit would be expected under this scenario, assuming that 20,000 radios are sold? 2. Use an activity-based costing approach, and calculate the break-even point and the incremental profit that would be earned on sales of 20,000 units. 3. Explain why the CVP analysis done in Requirement 2 is more accurate than the analysis done in Requirement 1. What recommendation would you make?
Freidrich is working with the operations manager to determine what the standard material cost is for a spice chest. He has watched the process from start to finish and taken detailed notes on what material is used. The easiest material to measure is the wood. Each chest uses 5 board feet and produces 1.5 feet of scrap. He is not sure what to do with the scrap that is produced; the company cannot buy the boards in any other dimensions. What amount of materials should be included in the standard for material costs?
Carolina Yachts builds custom yachts in its production factory in South Carolina. Once complete, these yachts must be shipped to the dealership. They have collected this shipping cost data: Prepare a scatter graph of the shipping data. Plot cost on the vertical axis and yachts shipped on the horizontal axis. Is the relationship between shipping costs and unit shipped approximately linear? Draw a straight line through the scatter graph. Using the high-low method, create the cost formula for Carolina Yachts shipping costs. The least-squares regression method was used and the analysis resulted in this cost equation: Y= 4,000+ 1,275x. Comment on the accuracy of your high-low method estimation. What would you estimate shipping costs to be if Carolina Yachts shipped 10 yachts in a single month? Use the cost formula you obtained in part B. Comment on how accurately this is reflected by the scatter graph you constructed. What factors other than number of yachts shipped do you think could affect Carolina Yachts shipping expense? Explain.
Potterii sells its products to large box stores and recently added a retail line of products to sell directly to consumers. These estimates are to be used in determining the overhead allocation rate for ABC: What would be the predetermined rate for each cost pool?
Pocket Umbrella, Inc. is considering producing a new type of umbrella. This new pocket-sized umbrella would fit into a coat pocket or purse. Classify the following costs of this new product as direct materials, direct labor, manufacturing overhead, or selling and administrative. Cost of advertising the product Fabric used to make the umbrellas Maintenance of cutting machines used to cut the umbrella fabric so it will fit the umbrella frame Wages of workers who assemble the product Presidents salary The salary of the supervisor of the people who assemble the product Wages of the product tester who stands in a shower to make sure the umbrellas do not leak Cost of market research survey Salary of the companys sales managers Depreciation of administrative office building
Jazon Manufacturing produces two different models of cameras. One model has an automatic focus, whereas the other requires the user to determine the focus. The two products are produced in batches. Each time a batch is produced, the equipment must be configured (set up) for the specifications of the camera model being produced. The manual-focus camera requires more parts than the automatic-focus model. The manual-focus model is also more labor intensive, requiring much more assembly time but less machine time. Although the manual model is more labor intensive, the machine configuration required for this product is more complex, causing the manual model to consume more of the setup activity resources than the automatic camera. Many, but not all, of the parts for the two cameras are purchased from external suppliers. Because it has more parts, the manual model makes more demands on the purchasing and receiving activities than does the automatic camera. Jazon currently assigns only manufacturing costs to the two products. Overhead costs are collected in one plantwide pool and are assigned to the two products in proportion to the direct labor hours used by each product. All other costs are viewed as period costs. Jazon budgets costs for all departments within the plantboth support departments like maintenance and purchasing and production departments like machining and assembly. Departmental managers are evaluated and rewarded on their ability to control costs. Individual managerial performance is assessed by comparing actual costs with budgeted costs. Required: 1. Is Jazon using a traditional or an activity-based cost management system? Explain. 2. Assume that you want to design a more accurate cost accounting system. What changes would you need to make? Be specific. Explain why the changes you make will improve the accuracy of cost assignments. 3. What changes would need to be made to implement an activity-based operational control system? Explain why you believe the changes will offer improved control.
Hales Company produces a product that requires two processes. In the first process, a subassembly is produced (subassembly A). In the second process, this subassembly and a subassembly purchased from outside the company (subassembly B) are assembled to produce the final product. For simplicity, assume that the assembly of one final unit takes the same time as the production of subassembly A. Subassembly A is placed in a container and sent to an area called the subassembly stores (SB stores) area. A production Kanban is attached to this container. A second container, also with one subassembly, is located near the assembly line (called the withdrawal store). This container has attached to it a withdrawal Kanban. Required: 1. Explain how withdrawal and production Kanban cards are used to control the work flow between the two processes. How does this approach minimize inventories? 2. Explain how vendor Kanban cards can be used to control the flow of the purchased subassembly. What implications does this have for supplier relationships? What role, if any, do continuous replenishment and EDI play in this process?
Good Scent, Inc., produces two colognes: Rose and Violet. Of the two, Rose is more popular. Data concerning the two products follow: The company uses a conventional costing system and assigns overhead costs to products using direct labor hours. Annual overhead costs follow. They are classified as fixed or variable with respect to direct labor hours. Required: 1. Using the conventional approach, compute the number of cases of Rose and the number of cases of Violet that must be sold for the company to break even. 2. Using an activity-based approach, compute the number of cases of each product that must be sold for the company to break even.
Appliance Apps has the following costs associated with its production and sale of devices that allow appliances to receive commands from cell phones. Prepare an income statement under both the absorption and variable costing methods along with a reconciliation between the two statements.
Nizam Company produces speaker cabinets. Recently, Nizam switched from a traditional departmental assembly line system to a manufacturing cell in order to produce the cabinets. Suppose that the cabinet manufacturing cell is the cost object. Assume that all or a portion of the following costs must be assigned to the cell: a. Depreciation on electric saws, sanders, and drills used to produce the cabinets b. Power to heat and cool the plant in which the cell is located c. Salary of cell supervisor d. Wood used to produce the cabinet housings e. Maintenance for the cells equipment (provided by the maintenance department) f. Labor used to cut the wood and to assemble the cabinets g. Replacement sanding belts h. Cost of janitorial services for the plant i. Ordering costs for materials used in production j. The salary of the industrial engineer (she spends about 20 percent of her time on work for the cell) k. Cost of maintaining plant and grounds l. Cost of plants personnel office m. Depreciation on the plant n. Plant receptionists salary and benefits Required: Identify which cost assignment method would likely be used to assign the costs of each of the preceding activities to the cabinet manufacturing cell: direct tracing, driver tracing, or allocation. When driver tracing is selected, identify a potential activity driver that could be used for the tracing.