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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
Jazon budgets costs for all departments within the plant—both 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.
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Chapter 2 Solutions
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- 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?arrow_forwardLarsen, Inc., produces two types of electronic parts and has provided the following data: There are four activities: machining, setting up, testing, and purchasing. Required: 1. Calculate the activity consumption ratios for each product. 2. Calculate the consumption ratios for the plantwide rate (direct labor hours). When compared with the activity ratios, what can you say about the relative accuracy of a plantwide rate? Which product is undercosted? 3. What if the machine hours were used for the plantwide rate? Would this remove the cost distortion of a plantwide rate?arrow_forwardBrandon Technology makes two models of a specialized sensor for the aerospace Industry. The difference in the two models relates to the required accuracy of the sensor. The Standard model is used for most normal operations while the High-Performance model is used for high-altitude and specialized missions. Before shipment, the two models are passed through a machine that, among other things, certifies the accuracy of the sensor. The company only has one testing machine. The price and costs of the two sensor models are shown here: Price per sensor Standard $ 52 $ 34 0.04 Variable cost per sensor Testing hours per sensor The testing machine used for both models has a capacity of 8.250 hours annually. Fixed manufacturing costs are $2,400,000 annually. Required: a. Suppose that the maximum annual unit sales that is possible for Brandon Technology is 250,000 units of the Standard model and 80,000 of the High-Performance model. How many units of each sensor model should Brandon Technology…arrow_forward
- Brandon Technology makes two models of a specialized sensor for the aerospace industry. The difference in the two models relates to the required accuracy of the sensor. The Standard model is used for most normal operations while the High-Performance model is used for high-altitude and specialized missions. Before shipment, the two models are passed through a machine that, among other things, certifies the accuracy of the sensor. The company only has one testing machine. The price and costs of the two sensor models are shown here: Standard High-Performance Price per sensor $ 52 $ 96 Variable cost per sensor $ 34 $ 41 Testing hours per sensor 0.04 0.11 The testing machine used for both models has a capacity of 8,250 hours annually. Fixed manufacturing costs are $2,400,000 annually. Required: a. Suppose that the maximum annual unit sales that is possible for Brandon Technology is 250,000 units of the Standard model and 80,000 of the High-Performance model. How many…arrow_forwardBrandon Technology makes two models of a specialized sensor for the aerospace industry. The difference in the two models relates to the required accuracy of the sensor. The Standard model is used for most normal operations while the High-Performance model is used for high-altitude and specialized missions. Before shipment, the two models are passed through a machine that, among other things, certifies the accuracy of the sensor. The company only has one testing machine. The price and costs of the two sensor models are shown here: Standard $ 56 Price per sensor Variable cost per sensor Testing hours per sensor $36 0.04 The testing machine used for both models has a capacity of 8,270 hours annually. Fixed manufacturing costs are $2,500,000 annually. Required: a. Suppose that the maximum annual unit sales that is possible for Brandon Technology is 251,000 units of the Standard model and 87,700 of the High-Performance model. How many units of each sensor model should Brandon Technology…arrow_forwardHall, Incorporated manufactures two components, Standard and Ultra, that are designed for the same function, but are made of different metals for operational performance reasons. The metal used in Standard is easy to work with and there are few quality issues or reworking required on the machines. The metal used in Ultra is more difficult to work with and often needs additional machine time and rework. Data on expected operations and direct costs for the next fiscal year follow: Account Administration Engineering Machine operation and maintenance Standard Miscellaneous Supervision Total 48,000 144,000 24,000 Ultral $ 3,384,000 2,520,000 Units produced Direct labor-hours used Machine-hours used Direct materials costs $5,163,000 Direct labor costs 855,000 The planning process team at Hall, Incorporated has estimated the following manufacturing overhead costs for the next fiscal year: 16,500 22,500 22,500 Total Amount $ 825,400 5,699,500 875,000 540,100 884,500 $8,824,500. 64,500 166,500…arrow_forward
- The Chopin Company has decided to introduce a new product. The new product can be manufactured by either a computer-assisted manufacturing (CAM) or a labor-intensive production (LIP) system. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs for each of the two methods are as follows. CAM System: Direct Material = $5.0 Direct Labor (DLH) = 0.5 DLH X $12 = $6 Variable Overhead = 0.5DLHx$6 = $3 Fixed Iverhead* = $ 2,440,000 LIP System: Direct Material = $5.6 Direct Labor (DLH) = 0.8 DLH X $9 = $7.2 Variable Overhead = 0.8 DLH X $6 = $4.8 Fixed Overhead* = $1,320,000 *These costs are directly traceable to the new product line. They would not be incurred if the new product were not produced. The company’s marketing research department has recommended an introductory unit sales price of $30. Selling expenses are estimated to be $500,000 annually plus $2 for each unit sold. (Ignore income taxes.) Required: Calculate the estimated…arrow_forwardBristol Fabricators, Inc., produces air purifiers in batches. To manufacture a batch of the purifiers, Bristol Fabricators, Inc., must set up the machines and assembly line tooling. Setup costs are batch-level costs because they are associated with batches rather than individual units of products. A separate Setup Department is responsible for setting up machines and tooling for different models of the air purifiers. Setup overhead costs consist of some costs that are variable and some costs that are fixed with respect to the number of setup-hours. The following information pertains to June 2020: E (Click the icon to view the information for June 2020.) Calculate the production-volume variance for fixed overhead setup costs. (Round all intermediary calculations to two decimal places and your final answer to the nearest whole number.) O A. $2,478 unfavorable O B. $2,478 favorable i Data Table C. $363 favorable O D. $363 unfavorable Budget Amounts Actual Amounts Units produced and sold…arrow_forwardThe Chopin Company has decided to introduce a new product. The new product can be manufactured by either a computer-assisted manufacturing (CAM) or a labor-intensive production (LIP) system. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs for each of the two methods are as follows. CAM System: Direct Material = $5.0 Direct Labor (DLH) = 0.5 DLH X $12 = $6 Variable Overhead = 0.5DLHx$6 = $3 Fixed Iverhead* = $ 2,440,000 LIP System: Direct Material = $5.6 Direct Labor (DLH) = 0.8 DLH X $9 = $7.2 Variable Overhead = 0.8 DLH X $6 = $4.8 Fixed Overhead* = $1,320,000 *These costs are directly traceable to the new product line. They would not be incurred if the new product were not produced. The company’s marketing research department has recommended an introductory unit sales price of $30. Selling expenses are estimated to be $500,000 annually plus $2 for each unit sold. (Ignore income taxes.) Required 4. Describe the circumstances under…arrow_forward
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- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning