Business
Engineering
Math
Science
Social Science
Hatch Manufacturing produces multiple machine parts. The theoretical cycle time for one of its products is 65 minutes per unit. The budgeted conversion costs for the manufacturing cell dedicated to the product are $12,960,000 per year. The total labor minutes available are 1,440,000. During the year, the cell was able to produce 0.6 units of the product per hour. Suppose also that production incentives exist to minimize unit product costs. Required: 1. Compute the theoretical conversion cost per unit. 2. Compute the applied conversion cost per minute (the amount of conversion cost actually assigned to the product). 3. Discuss how this approach to assigning conversion cost can improve delivery time performance. Explain how conversion cost acts as a performance driver for on-time deliveries.
Cornerstones of Cost Management (C...
Solutions
Cornerstones of Cost Management (C...
Hatch Manufacturing produces multiple machine parts. The theoretical cycle time for one of its products is 65 minutes per unit. The budgeted conversion costs for the manufacturing cell dedicated to the product are $12,960,000 per year. The total labor minutes available are 1,440,000. During the year, the cell was able to produce 0.6 units of the product per hour. Suppose also that production incentives exist to minimize unit product costs.
Required:
- 1. Compute the theoretical conversion cost per unit.
- 2. Compute the applied conversion cost per minute (the amount of conversion cost actually assigned to the product).
- 3. Discuss how this approach to assigning conversion cost can improve delivery time performance. Explain how conversion cost acts as a performance driver for on-time deliveries.
1.
Calculate the theoretical conversion cost per unit.
Explanation of Solution
Conversion cost: The cost of changing the materials into a finished product. It includes direct labour costs and manufacturing overhead costs.
Cycle time: Cycle time and velocity are two operational “measures of responsiveness”. Cycle time is the span of time taken to produce a unit of output from the time the materials are received till the good is supplied to finished goods inventory. Therefore, cycle time is the time taken to produce a product.
Calculate theoretical conversion cost per unit:
2.
Calculate the applied conversion cost per minute.
3.
Discuss the manner in which this approach can improve delivery time performance by assigning conversion costs.
Chapter 13 Solutions
Additional Business Textbook Solutions
Management, Loose-Leaf Version
Corporate Financial Accounting
Fundamentals of Financial Management (MindTap Course List)
Macroeconomics
Exploring Economics
Pkg Acc Infor Systems MS VISIO CD
Accounting Information Systems
Corporate Financial Accounting
PAYROLL ACCT.,2019 ED.(LL)-TEXT
Essentials of Economics (MindTap Course List)
Accounting Information Systems
ECON: MICRO4 (New, Engaging Titles from 4LTR Press)
College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)
Financial & Managerial Accounting
College Accounting, Chapters 1-27
Principles of Macroeconomics (MindTap Course List)
Fundamentals of Financial Management (MindTap Course List)
Purchasing and Supply Chain Management
Economics For Today
Financial & Managerial Accounting
Principles of Macroeconomics (MindTap Course List)
Intermediate Accounting: Reporting And Analysis
Managerial Accounting: The Cornerstone of Business Decision-Making
Contemporary Marketing
STATISTICS F/BUSINESS+ECONOMICS-TEXT
Fundamentals of Financial Management, Concise Edition (MindTap Course List)
Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)
College Accounting (Book Only): A Career Approach
Survey of Accounting (Accounting I)
Essentials of Business Communication (MindTap Course List)
Financial And Managerial Accounting
Financial Accounting
MKTG 12:STUDENT ED.-TEXT
Brief Principles of Macroeconomics (MindTap Course List)
Foundations of Business (MindTap Course List)
Principles of Economics (MindTap Course List)
Statistics for Business & Economics, Revised (MindTap Course List)
Principles of Microeconomics (MindTap Course List)
Economics (MindTap Course List)
Financial Accounting
Practical Management Science
Accounting (Text Only)
College Accounting (Book Only): A Career Approach
Managerial Accounting
Cornerstones of Financial Accounting
Micro Economics For Today
MACROECONOMICS FOR TODAY
Economics: Private and Public Choice (MindTap Course List)
Macroeconomics: Private and Public Choice (MindTap Course List)
Understanding Management (MindTap Course List)
Microeconomics: Private and Public Choice (MindTap Course List)
