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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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During the week of May 10, Hyrum Manufacturing produced and shipped 16,000 units of its aluminum wheels: 4,000 units of Model A and 12,000 units of Model B. The cycle time for Model A is 1.09 hours and for Model B is 0.47 hour. The following costs and production hours were incurred:

Chapter 13, Problem 25BEA, During the week of May 10, Hyrum Manufacturing produced and shipped 16,000 units of its aluminum

Required:

  1. 1. Assume that the value-stream costs and total units shipped apply only to one model (a single-product value stream). Calculate the unit cost, and comment on its accuracy.
  2. 2. Assume that Model A is responsible for 40% of the materials cost. Calculate the unit cost for Models A and B, and comment on its accuracy. Explain the rationale for using units shipped instead of units produced in the calculation.
  3. 3. Calculate the unit cost for the two models, using DBC. Explain when and why this cost is more accurate than the unit cost calculated in Requirement 2.

1.

To determine

Compute unit cost assuming that the value-stream cost and total units shipped apply to a single model.

Explanation

Value Stream:

Value stream consists of the processes through which a product goes; that is from procurement to delivery. In value stream, all processes are covered whether or not they add value to the product.

Computation of unit cost:

Unit cost can be computed by using formula:

Unitcost=TotalvaluestreamcostTotalunits

Substitute $900,000 for total value stream cost and 16,000 for total units in the above formula

2.

To determine

Compute unit cost of both the models in case, Model A is responsible for 40% of the material cost. Comment on accuracy of the results and provide the rationale behind using units shipped instead of units produced.

3.

To determine

Compute unit cost for each model using duration based costing.

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