puestion 4.2Tuggs Corporation manufactures two products, Racket and Table. Table, having been developed as anattempt to enter a market closely related to that of Racket, has been recently created. Of the twoproducts, Table is the more complex one, thus requiring two and a half hours of direct labour time perunit to manufacture, compared to one hour of direct labour time for Racket. The table is produced onan automated production line.On the basis of direct labour hours, Overhead is currently assigned to the products. The companyestimated it would incur $364,000 in manufacturing overhead costs and produce 4,900 units of Tableand 22,100 units of Racket during the current year. Unit costs for materials and direct labour are asfollows:RacketTableDirect materials$9$20Direct labour57$15Submission Instructions:1. Compute the predetermined overhead rate under the current method of allocation and determinethe unit product cost of each product for the current year.2. The company's overhead costs can be attributed to four major activities. These activities and theamount of overhead cost attributable to each for the current year are given below:Expected ActivityEstimated Overhead Cost$161,000$32,000$81,000$90,000Activity Cost PoolMachine setups requiredRacketTableTotal8007001,500Purchase orders issued200150350Machine hours required3,9007,00010,900Maintenance requests310510820issuedTotal$364,000Determine the unit product cost of each product for the current year using the data above and anactivity-based costing approach.

Activity-based costing is the method in which cost is allocated on the basis of cost driver rates on…

Submission Instructions: 1. Compute the predetermined overhead rate under the current method of allocation and determine the unit product cost of each product for the current year. 2. The company's overhead costs can be attributed to four major activities. These activities and the amount of overhead cost attributable to each for the current year are given below: Activity Cost Pool Machine setups required Expected Activity Total 1,500 Racket Table Estimated Overhead Cost $161,000 $32,000 $81,000 800 700 Purchase orders issued 200 150 350 Machine hours required 3,900 7,000 10,900 Maintenance requests $90,000 310 510 820 issued Total $364,000 Determine the unit product cost of each product for the current year using the data above and an activity-based costing approach.

Submission Instructions: 1. Compute the predetermined overhead rate under the current method of allocation and determine the unit product cost of each product for the current year. 2. The company's overhead costs can be attributed to four major activities. These activities and the amount of overhead cost attributable to each for the current year are given below: Activity Cost Pool Machine setups required Expected Activity Total 1,500 Racket Table Estimated Overhead Cost $161,000 $32,000 $81,000 800 700 Purchase orders issued 200 150 350 Machine hours required 3,900 7,000 10,900 Maintenance requests $90,000 310 510 820 issued Total $364,000 Determine the unit product cost of each product for the current year using the data above and an activity-based costing approach.

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 5CE: See Cornerstone Exercise 20.4. Fisher Company has three sequential processes: cutting, welding, and...

See similar textbooks

Similar questions

Requirement 2. Consider two types of elliptical machines made by Roberta, Inc. One machine, designed for professional use, is complex to make and is produced in many batches. The other machine is simple to make and is produced in few batches. Suppose that Roberta needs the same number of machine-hours to make each type of elliptical machine and that Roberta allocates all overhead costs using machine-hours as the only allocation base. How, if at all, would the machines be miscosted? Briefly explain why. The complex elliptical machine made in ▼ few many batches will use ▼ significantly less significantly more the same batch-level overhead resources compared to the simple elliptical machine that is made in ▼ few many batches. In addition, the complex machine will use ▼ less more ▼ facility-sustaining product-sustaining overhead resources because it is complex. Because ▼ each elliptical machine requires the same amount of…
Problem 4 Bexter Labs produces three products: A, B, and C. Bexter can sell up to 3000 units of product A, up to 2000 units of product B, and up to 2000 units of product C. Each unit of product C uses two units of A and three units of B and incurs $5 in processing costs. Products A and B are produced from either raw material 1 or raw material 2. It costs $6 to purchase and process one unit of raw material 1. Each processed unit of raw material 1 yields two units of A and three units of B. It costs $3 to purchase and process a unit of raw material 2. Each processed unit of raw material 2 yields one unit of A and two units of B. The unit prices for the products are A, $5; B, $4; C, $25. The quality levels of each product are: A, 8; B, 7; C, 6. The average quality level of the units sold must be at least 7. Determine how to maximize Bexter's profit.
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. 5-45 Driver Analysis Refer to the information for Diviney Manufacturing on the previous page. Required: CONCEPTUAL CONNECTION For each situation, identify the possible root cause(s) of the activity cost (such as plant layout, process design, and product design).
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.
See Cornerstone Exercise 20.4. Fisher Company has three sequential processes: cutting, welding, and assembly. Assume that the optimal mix is Component A = 0 units per week; and Component B = 30 units per week. Demand is uniformly spread out over the five-day work week. Fisher requires a 2.5-day buffer. Required: 1. Identify the drummer, the rate of production, the time buffer, and the rope. 2. Illustrate the DBR structure of Fisher Company. 3. What if the Welding Department was allowed or encouraged to produce at capacity? What effect will this have on work-in-process inventories?
Refer to Exercise 12.14. Suppose that for 20x2, Sanford, Inc., has chosen suppliers that provide higher-quality parts and redesigned its plant layout to reduce material movement. Additionally, Sanford implemented a new setup procedure and provided training for its purchasing agents. As a consequence, less setup time is required and fewer purchasing mistakes are made. At the end of 20x2, the information shown on page 680 is provided. Required: 1. Prepare a report that compares the non-value-added costs for 20x2 with those of 20x1. 2. What is the role of activity reduction for non-value-added activities? For value-added activities? 3. Comment on the value of a trend report.
Lloyd Gettys, a client of Kevin Lomax, is considering two different processes to make his product—process 1 and process 2. Process 1 requires Lloyd to manufacture subcomponents of the product in-house. As a result, materials are less expensive, but fixed overhead is higher. Process 2 involves purchasing all subcomponents from outside suppliers. The direct materials costs are higher, but fixed factory overhead is considerably lower. Relevant data for a sales level of 30,000 units follow: Process 1 Process 2 Sales $8,010,000 $8,010,000 Variable expenses 2,700,000 4,200,000 Contribution margin $5,310,000 $3,810,000 Less total fixed expenses 3,650,625 1,428,750 Operating income $1,659,375 $2,381,250 Unit selling price $267 $267 Unit variable cost $90 $140 Unit contribution margin $177 $127 a. Compute the degree of operating leverage for each process. b. Suppose that sales are 20 percent higher than budgeted. By what percentage will operating income increase for each process? What will be…
Question 10 Cheyenne, Inc. has recently started the manufacture of Tri-Robo, a three-wheeled robot that can scan a home for fires and gas leaks and then transmit this information to a smartphone. The cost structure to manufacture 19,400 Tri-Robos is as follows. Cost Direct materials ($49 per robot) $950,600 Direct labor ($37 per robot) 717,800 Variable overhead ($6 per robot) 116,400 Allocated fixed overhead ($31 per robot) 600,000 Total $2,384,800 Cheyenne is approached by Tienh Inc., which offers to make Tri-Robo for $112 per unit or $2,172,800.Following are independent assumptions.
5 Lasker Company divided its tool production factory into manufacturing cells. Each cell produces one product. The cordless drill cell had the following data for last quarter: Maximum units produced in a quarter: 90,000 units Actual units produced in a quarter: 72,000 units Hours of cell production labor in a quarter: 40,000 hours If required, round your answers to one decimal place. Required: 1. Compute the theoretical cycle time (in minutes per unit). 2. Compute the actual cycle time (in minutes per unit). 3. Compute the theoretical velocity (in units per hour). 4. Compute the actual velocity (in units per hour).
b) Paste Corporation has established new plant for the production of new product called “Diazinon”. There are two different manufacturing methods available to produce Diazinon. Either by using a process or an order base method. The assembling technique won't influence the quality or deals of the item. The evaluated manufacturing expenses of the two strategies are as per the following:Process base Order baseVariable manufacturing cost per unit..................... Rs14.00 Rs.17.60Fixed manufacturing cost per year ......................Rs. 2,440,000 Rs. 1,320,000 The organization's statistical surveying office has suggested an initial selling cost of Rs.35 per unit for Diazinon. The yearly fixed selling and admin costs of the Diazinon are Rs.500, 000. The variable selling and regulatory costs are Rs. 2 per unit. Required: I. CM ratio and variable expenses ratio. If Paste Corporation uses the:1. Process base manufacturing method.2. Order base manufacturing method.II. Break-even point in…
A company makes two products (1 and 2). Each product requires time on two machines A and B. The specifications for each product are as follows; Product 1 Product 2 Processing time on machine A (hrs/unit) 2 2 Processing time on machine B (hrs/unit) 1 2 Material and labor cost (Sh./unit) 14 15 Selling price (Sh./unit) 16 18 Maximum possible sale (units) 130 150 The amount of time available on machine A is 360 hrs and on machine B is 260 hrs. Formulate the LP problem, which when solved, would indicate the number of product 1 and 2, which should be sold in order to maximize total…
A particular machine is a bottleneck. On that machine, 3 machine hours are required to produce each unit of Product A, 1 hour is required to produce each unit of Product B, and 2 hours are required to produce each unit of Product C. In which order should it produce its products? C, A B The order of production doesn't matter. A, C, B B, C, A