Concept introduction:
Cycle efficiency:
Cycle efficiency denotes about the use of cycle time in value-added activities. In other words, we can say that cycle efficiency shows relationship between value-added time and cycle time. On the basis of cycle efficiency we know about the use of whole cycle time in the value-added activities.
Requirement 1:
Non-value-added time under the traditional manufacturing process.
Answer to Problem 3P
Explanation of Solution
Concept introduction:
Cycle efficiency:
Cycle efficiency denotes about the use of cycle time in value-added activities. In other words, we can say that cycle efficiency shows relationship between value-added time and cycle time. On the basis of cycle efficiency, we know about the use of whole cycle time in the value-added activities.
Requirement 2:
Cycle efficiency under the traditional manufacturing process.
Answer to Problem 3P
Explanation of Solution
Concept introduction:
Cycle efficiency:
Cycle efficiency denotes about the use of cycle time in value-added activities. In other words, we can say that cycle efficiency shows relationship between value-added time and cycle time. On the basis of cycle efficiency, we know about the use of whole cycle time in the value-added activities.
Requirement 3:
Non-value-added time under the proposed lean manufacturing process.
Answer to Problem 3P
Explanation of Solution
Concept introduction:
Cycle efficiency:
Cycle efficiency denotes about the use of cycle time in value-added activities. In other words, we can say that cycle efficiency shows relationship between value-added time and cycle time. On the basis of cycle efficiency, we know about the use of whole cycle time in the value-added activities.
Requirement 4:
Cycle efficiency under the proposed lean manufacturing process.
Answer to Problem 3P
Explanation of Solution
Concept introduction:
Cycle efficiency:
Cycle efficiency denotes about the use of cycle time in value-added activities. In other words, we can say that cycle efficiency shows relationship between value-added time and cycle time. On the basis of cycle efficiency we know about the use of whole cycle time in the value-added activities.
Requirement 5:
Would the proposed lean approach improve cycle efficiency?
Answer to Problem 3P
Yes, the proposed lean approach would improve cycle efficiency.
Explanation of Solution
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Chapter C Solutions
MANAGERIAL ACCOUNTING
- Use the following information for Brief Exercises 4-34 and 4-35: Sanjay Company manufactures a product in a factory that has two producing departments, Assembly and Painting, and two support departments, S1 and S2. The activity driver for S1 is square footage, and the activity driver for S2 is number of machine hours. The following data pertain to Sanjay: Brief Exercises 4-34 (Appendix 4B) Assigning Support Department Costs by Using the Direct Method Refer to the information for Sanjay Company above. Required: 1. Calculate the cost assignment ratios to be used under the direct method for Departments S1 and S2. (Note: Each support department will have two ratiosone for Assembly and the other for Painting.) 2. Allocate the support department costs to the producing departments by using the direct method.arrow_forwardSouthward Company has implemented a JIT flexible manufacturing system. John Richins, controller of the company, has decided to reduce the accounting requirements given the expectation of lower inventories. For one thing, he has decided to treat direct labor cost as a part of overhead and to discontinue the detailed direct labor accounting of the past. The company has created two manufacturing cells, each capable of producing a family of products: the radiator cell and the water pump cell. The output of both cells is sold to a sister division and to customers who use the radiators and water pumps for repair activity. Product-level overhead costs outside the cells are assigned to each cell using appropriate drivers. Facility-level costs are allocated to each cell on the basis of square footage. The budgeted direct labor and overhead costs are as follows: The predetermined conversion cost rate is based on available production hours in each cell. The radiator cell has 45,000 hours available for production, and the water pump cell has 27,000 hours. Conversion costs are applied to the units produced by multiplying the conversion rate by the actual time required to produce the units. The radiator cell produced 81,000 units, taking 0.5 hour to produce one unit of product (on average). The water pump cell produced 90,000 units, taking 0.25 hour to produce one unit of product (on average). Other actual results for the year are as follows: All units produced were sold. Any conversion cost variance is closed to Cost of Goods Sold. Required: 1. Calculate the predetermined conversion cost rates for each cell. 2. Prepare journal entries using backflush accounting. Assume two trigger points, with completion of goods as the second trigger point. 3. Repeat Requirement 2, assuming that the second trigger point is the sale of the goods. 4. Explain why there is no need to have a work-in-process inventory account. 5. Two variants of backflush costing were presented in which each used two trigger points, with the second trigger point differing. Suppose that the only trigger point for recognizing manufacturing costs occurs when the goods are sold. How would the entries be listed here? When would this backflush variant be considered appropriate?arrow_forwardMabbut Company has the following departmental manufacturing layout for one of its plants: A consulting firm recommended a value stream with the following manufacturing cell: Required: 1. Calculate the total time it takes to produce a batch of 10 units using the traditional departmental manufacturing layout. 2. Using cellular manufacturing, how much time is saved producing the same batch of 10 units? Assuming the cell operates continuously, what is the production rate? Which process controls this production rate? 3. Assume the processing time of Welding is reduced to 6 minutes, while the times of the other processes stay the same. What is the production rate now, and how long will it take to produce a batch of 10 units if the cell is in a continuous production mode?arrow_forward
- Use the following information for Brief Exercises 4-34 and 4-35: Sanjay Company manufactures a product in a factory that has two producing departments, Assembly and Painting, and two support departments, S1 and S2. The activity driver for S1 is square footage, and the activity driver for S2 is number of machine hours. The following data pertain to Sanjay: Brief Exercises 4-35 (Appendix 4B) Sequential Method Refer to the information for Sanjay Company on the previous page. Now assume that Sanjay uses the sequential method to allocate support department costs. S1 is allocated first, then S2. Required: 1. Calculate the cost assignment ratios to be used under the sequential method for S2, Assembly, and Painting. Carry out your answers to four decimal places. 2. Allocate the overhead costs to the producing departments by using the sequential method.arrow_forwardActivity-based costing and product cost distortion The management of Four Finger Appliance Company in Exercise 14 has asked you to use activity-based costing instead of direct labor hours to allocate factory overhead costs to the two products. You have determined that 81,000 of factory overhead from each of the production departments can be associated with setup activity (162,000 in total). Company records indicate that blenders required 135 setups, while the toaster ovens required only 45 setups. Each product has a production volume of 7,500 units. Determine the three activity rates (assembly, test and pack, and setup). Determine the total factory overhead and factory overhead per unit allocated to each product using the activity rates in (A).arrow_forwardAnderson 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_forward
- Gumbrecht Company has the following departmental manufacturing layout for one of its plants: A consulting firm has recommended a value stream with the following manufacturing cell: Required: 1. Calculate the total time it takes to produce a batch of 20 units using the traditional departmental manufacturing layout. 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. Assume the processing time of Casting is reduced to 9 minutes, while the times of the other processes stay the same. What is the production rate now, and how long will it take to produce a batch of 20 units if the cell is in a continuous production mode?arrow_forwardBumblebee Mobiles manufactures a line of cell phones. The management has identified the following overhead costs and related cost drivers for the coming year. The following were incurred in manufacturing two of their cell phones, Bubble and Burst, during the first quarter. REQUIREMENT Review the worksheet called ABC that follows these requirements. You have been asked to determine the cost of each product using an activity-based cost system. Note that the problem information is already entered into the Data Section of the ABC worksheet.arrow_forwardFisico Company produces exercise bikes. One of its plants produces two versions: a standard model and a deluxe model. The deluxe model has a wider and sturdier base and a variety of electronic gadgets to help the exerciser monitor heartbeat, calories burned, distance traveled, etc. At the beginning of the year, the following data were prepared for this plant: Additionally, the following overhead activity costs are reported: Required: 1. Calculate the cost per unit for each product using direct labor hours to assign all overhead costs. 2. Calculate activity rates and determine the overhead cost per unit. Compare these costs with those calculated using the unit-based method. Which cost is the most accurate? Explain.arrow_forward
- Calculate lead time Williams Optical Inc. is considering a new lean product cell. The present manufacturing approach produces a product in four separate steps. The production batch sizes are 45 units. The process time for each step is as follows: The time required to move each batch between steps is 5 minutes. In addition, the time to move raw materials to Process Step 1 is also 5 minutes, and the time to move completed units from Process Step 4 to finished goods inventory is 5 minutes. The new lean layout will allow the company to reduce the batch sizes from 45 units to 3 units. The time required to move each batch between steps and the inventory locations will be reduced to 2 minutes. The processing time in each step will stay the same. Determine the value-added, non-value-added, and total lead times, and the value-added ratio under the (A) present and (B) proposed production approaches. (Round percentages to one decimal place.)arrow_forwardJolene Askew, manager of Feagan Company, has committed her company to a strategically sound cost reduction program. Emphasizing life-cycle cost management is a major part of this effort. Jolene is convinced that production costs can be reduced by paying more attention to the relationships between design and manufacturing. Design engineers need to know what causes manufacturing costs. She instructed her controller to develop a manufacturing cost formula for a newly proposed product. Marketing had already projected sales of 25,000 units for the new product. (The life cycle was estimated to be 18 months. The company expected to have 50 percent of the market and priced its product to achieve this goal.) The projected selling price was 20 per unit. The following cost formula was developed: Y=200,000+10X1 where X1=Machinehours(Theproductisexpectedtouseonemachinehourforeveryunitproduced.) Upon seeing the cost formula, Jolene quickly calculated the projected gross profit to be 50,000. This produced a gross profit of 2 per unit, well below the targeted gross profit of 4 per unit. Jolene then sent a memo to the Engineering Department, instructing them to search for a new design that would lower the costs of production by at least 50,000 so that the target profit could be met. Within two days, the Engineering Department proposed a new design that would reduce unit-variable cost from 10 per machine hour to 8 per machine hour (Design Z). The chief engineer, upon reviewing the design, questioned the validity of the controllers cost formula. He suggested a more careful assessment of the proposed designs effect on activities other than machining. Based on this suggestion, the following revised cost formula was developed. This cost formula reflected the cost relationships of the most recent design (Design Z). Y=140,000+8X1+5,000X2+2,000X3 where X1=MachinehoursX2=NumberofbatchesX3=Numberofengineeringchangeorders Based on scheduling and inventory considerations, the product would be produced in batches of 1,000; thus, 25 batches would be needed over the products life cycle. Furthermore, based on past experience, the product would likely generate about 20 engineering change orders. This new insight into the linkage of the product with its underlying activities led to a different design (Design W). This second design also lowered the unit-level cost by 2 per unit but decreased the number of design support requirements from 20 orders to 10 orders. Attention was also given to the setup activity, and the design engineer assigned to the product created a design that reduced setup time and lowered variable setup costs from 5,000 to 3,000 per setup. Furthermore, Design W also creates excess activity capacity for the setup activity, and resource spending for setup activity capacity can be decreased by 40,000, reducing the fixed cost component in the equation by this amount. Design W was recommended and accepted. As prototypes of the design were tested, an additional benefit emerged. Based on test results, the post-purchase costs dropped from an estimated 0.70 per unit sold to 0.40 per unit sold. Using this information, the Marketing Department revised the projected market share upward from 50 percent to 60 percent (with no price decrease). Required: 1. Calculate the expected gross profit per unit for Design Z using the controllers original cost formula. According to this outcome, does Design Z reach the targeted unit profit? Repeat, using the engineers revised cost formula. Explain why Design Z failed to meet the targeted profit. What does this say about the use of unit-based costing for life-cycle cost management? 2. Calculate the expected profit per unit using Design W. Comment on the value of activity information for life-cycle cost management. 3. The benefit of the post-purchase cost reduction of Design W was discovered in testing. What direct benefit did it create for Feagan Company (in dollars)? Reducing post-purchase costs was not a specific design objective. Should it have been? Are there any other design objectives that should have been considered?arrow_forwardUse the following information for Brief Exercises 4-27 and 4-28: Quillen Company manufactures a product in a factory that has two producing departments, Cutting and Sewing, and two support departments, S1 and S2. The activity driver for S1 is number of employees, and the activity driver for S2 is number of maintenance hours. The following data pertain to Quillen: Brief Exercises 4-27 (Appendix 4B) Assigning Support Department Costs by Using the Direct Method Refer to the information for Quillen Company above. Required: 1. Calculate the cost assignment ratios to be used under the direct method for Departments S1 and S2. (Note: Each support department will have two ratiosone for Cutting and the other for Sewing.) 2. Allocate the support department costs to the producing departments by using the direct method.arrow_forward
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