   Chapter 13, Problem 32BEB ### Managerial Accounting: The Corners...

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

#### Solutions

Chapter
Section ### Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
60 views

# During the week of August 21, Parley Manufacturing produced and shipped 4,000 units of its machine tools: 1,500 units of Tool SK1 and 2,500 units of Tool SK3. The cycle time for SK1 is 0.73 hour, and the cycle time for SK3 is 0.56 hour. The following costs were incurred: Required: 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. Assume that Tool SK1 is responsible for 60% of the materials cost. Calculate the unit cost for Tool SK 1 and Tool SK3, and comment on its accuracy. Explain the rationale for using units shipped instead of units produced in the calculation. 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 \$225,000 for total value stream cost and 4,000 for total units in the above formula

2.

To determine

Compute unit cost of both the models in case, Model A is responsible for 60% 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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