Concept explainers
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?
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Cornerstones of Cost Management (Cornerstones Series)
- Reducir, Inc., produces two different types of hydraulic cylinders. Reducir produces a major subassembly for the cylinders in the Cutting and Welding Department. Other parts and the subassembly are then assembled in the Assembly Department. The activities, expected costs, and drivers associated with these two manufacturing processes are given below. Note: In the assembly process, the materials-handling activity is a function of product characteristics rather than batch activity. Other overhead activities, their costs, and drivers are listed below. Other production information concerning the two hydraulic cylinders is also provided: Required: 1. Using a plantwide rate based on machine hours, calculate the total overhead cost assigned to each product and the unit overhead cost. 2. Using activity rates, calculate the total overhead cost assigned to each product and the unit overhead cost. Comment on the accuracy of the plantwide rate. 3. Calculate the global consumption ratios. 4. Calculate the consumption ratios for welding and materials handling (Assembly) and show that two drivers, welding hours and number of parts, can be used to achieve the same ABC product costs calculated in Requirement 2. Explain the value of this simplification. 5. Calculate the consumption ratios for inspection and engineering, and show that the drivers for these two activities also duplicate the ABC product costs calculated in Requirement 2.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_forwardBenson Pharmaceuticals uses a process-costing system to compute the unit costs of the over-the-counter cold remedies that it produces. It has three departments: mixing, encapsulating, and bottling. In mixing, the ingredients for the cold capsules are measured, sifted, and blended (with materials assumed to be uniformly added throughout the process). The mix is transferred out in gallon containers. The encapsulating department takes the powdered mix and places it in capsules (which are necessarily added at the beginning of the process). One gallon of powdered mix converts into 1,500 capsules. After the capsules are filled and polished, they are transferred to bottling, where they are placed in bottles that are then affixed with a safety seal, lid, and label. Each bottle receives 50 capsules. During March, the following results are available for the first two departments: Overhead in both departments is applied as a percentage of direct labor costs. In the mixing department, overhead is 200% of direct labor. In the encapsulating department, the overhead rate is 150% of direct labor. Required: 1. Prepare a production report for the mixing department using the weighted average method. Follow the five steps outlined in the chapter. (Note: Round to two decimal places for the unit cost.) 2. Prepare a production report for the encapsulating department using the weighted average method. Follow the five steps outlined in the chapter. (Note: Round to four decimal places for the unit cost.) 3. CONCEPTUAL CONNECTION Explain why the weighted average method is easier to use than FIFO. Explain when weighted average will give about the same results as FIFO.arrow_forward
- Mephis Manufacturing has a manufacturing process that results in four separate products that together incur some portion of joint costs. If the appropriate split-off point is determined to be at the third stage in the production process, how will the costs incurred after the third stage be accounted for?arrow_forwardStore Corporation is in the process of scheduling the appropriate machinery to switch their production to a new product line, this is an example of a(n):arrow_forwardIf JIT manufacturing is used and each manufacturing cell produces a single product, which of the following is considered a direct product cost? Inspection costs Materials Setup costs All of thesearrow_forward
- Doran Technologies produces a single product. Expected manufacturing costs are as follows:arrow_forwardJohnston Adhesives Company makes three widely used industrial adhesives: A101, A204, and B216. Sales and production information for each of the three adhesives are shown in the following table. Most of Johnston’s customers ask for a special blend of the three products, which improves heat-resistance. The additional separable processing requires additional time and materials, and the price is increased accordingly, as shown in the table. Assume that Johnston produces only for specific customer orders, so there is no beginning or ending inventory. Assume also that all of Johnston’s customers requested the heat-resistant version of the products so that all production required additional separable processing. Total joint cost for the three products is $3,411,000. A101 A204 B216 Gallons sold 240,000 240,000 178,000 Final sales price per gallon $ 13 $ 6 $ 11 Price at split-off 10 3 7 Separable processing cost $ 563,000 $ 81,000 $ 623,000 Calculate the unit product cost…arrow_forwardFordham Corporation produces a single product. The standard costs for one unit of its Concourse product are as follows:arrow_forward
- Anderson Company has the following departmental manufacturing structure for one of its products: After some study, the production manager of Anderson recommended the following revised cellular manufacturing approach: Required: 1. Calculate the total time it takes to produce a batch of 20 units using Andersons traditional departmental structure. 2. Using cellular manufacturing, how much time is saved producing the same batch of 20 units? Assuming the cell operates continuously, what is the production rate? Which process controls this production rate? 3. What if the processing times of molding, welding, and assembly are all reduced to six minutes each? What is the production rate now, and how long will it take to produce a batch of 20 units?arrow_forwardBienestar Inc., has the following departmental structure for producing a well-known multivitamin: A consultant designed the following cellular manufacturing structure for the same product: The times above the processes represent the time required to process one unit of product. Required: 1. Calculate the time required to produce a batch of 15 bottles using a batch-processing departmental structure. 2. Calculate the time to process 15 units using cellular manufacturing. 3. How much manufacturing time will the cellular manufacturing structure save for a batch of 15 units?arrow_forwardJazon 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 manufacturing costs to the two products. Overhead costs are collected in one plantwide pool and are assigned to the two products in proportion to the direct labor hours used by each product. All other costs are viewed as period costs. Jazon budgets costs for all departments within the plantboth 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.arrow_forward
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