Chess Woods Limited produces two products: wooden chess pieces and wooden inlaid chess boards. Under t $325.00. An analysis of the activities and their costs revealed that three cost drivers would be used under a ne a set of chess pieces was determined to be $298.00 per set. Given this change in the cost structure A. The costing results for chess pieces under the new system depend on the adequacy and quality of the B. Chess pieces have benefited from the new system. O C. Chess will now have a lower sales price. D. Chess pieces are definitely more accurately costed.
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![Answer the following questions using the information below:
Chess Woods Limited produces two products: wooden chess pieces and wooden inlaid chess boards, Under their traditional cost system using one cost driver (direct manufacturing labor hours), the cost of a set of wooden chess pieces is
$325.00. An analysis of the activities and their costs revealed that three cost drivers would be used under a new ABC system. These cost drivers would be equipment usage, storage area for the material, and type of woods used. The new cost of
a set of chess pieces was determined to be $298.00 per set.
Given this change in the cost structure
O A. The costing results for chess pieces under the new system depend on the adequacy and quality of the estimated cost drivers and costs used by the system.
O B. Chess pieces have benefited from the new system.
O C. Chess will now have a lower sales price.
O D. Chess pieces are definitely more accurately costed.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa7b40a41-3ef4-4ce0-8815-6254b6673f01%2F669011dc-a3ad-49b2-a040-4b759edeeaeb%2Fa6xsyfv_processed.jpeg&w=3840&q=75)
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- Evans, Inc., has a unit-based costing system. Evanss Miami plant produces 10 different electronic products. The demand for each product is about the same. Although they differ in complexity, each product uses about the same labor time and materials. The plant has used direct labor hours for years to assign overhead to products. To help design engineers understand the assumed cost relationships, the Cost Accounting Department developed the following cost equation. (The equation describes the relationship between total manufacturing costs and direct labor hours; the equation is supported by a coefficient of determination of 60 percent.) Y=5,000,000+30X,whereX=directlaborhours The variable rate of 30 is broken down as follows: Because of competitive pressures, product engineering was given the charge to redesign products to reduce the total cost of manufacturing. Using the above cost relationships, product engineering adopted the strategy of redesigning to reduce direct labor content. As each design was completed, an engineering change order was cut, triggering a series of events such as design approval, vendor selection, bill of materials update, redrawing of schematic, test runs, changes in setup procedures, development of new inspection procedures, and so on. After one year of design changes, the normal volume of direct labor was reduced from 250,000 hours to 200,000 hours, with the same number of products being produced. Although each product differs in its labor content, the redesign efforts reduced the labor content for all products. On average, the labor content per unit of product dropped from 1.25 hours per unit to one hour per unit. Fixed overhead, however, increased from 5,000,000 to 6,600,000 per year. Suppose that a consultant was hired to explain the increase in fixed overhead costs. The consultants study revealed that the 30 per hour rate captured the unit-level variable costs; however, the cost behavior of other activities was quite different. For example, setting up equipment is a step-fixed cost, where each step is 2,000 setup hours, costing 90,000. The study also revealed that the cost of receiving goods is a function of the number of different components. This activity has a variable cost of 2,000 per component type and a fixed cost that follows a step-cost pattern. The step is defined by 20 components with a cost of 50,000 per step. Assume also that the consultant indicated that the design adopted by the engineers increased the demand for setups from 20,000 setup hours to 40,000 setup hours and the number of different components from 100 to 250. The demand for other non-unit-level activities remained unchanged. The consultant also recommended that management take a look at a rejected design for its products. This rejected design increased direct labor content from 250,000 hours to 260,000 hours, decreased the demand for setups from 20,000 hours to 10,000 hours, and decreased the demand for purchasing from 100 component types to 75 component types, while the demand for all other activities remained unchanged. Required: 1. Using normal volume, compute the manufacturing cost per labor hour before the year of design changes. What is the cost per unit of an average product? 2. Using normal volume after the one year of design changes, compute the manufacturing cost per hour. What is the cost per unit of an average product? 3. Before considering the consultants study, what do you think is the most likely explanation for the failure of the design changes to reduce manufacturing costs? Now use the information from the consultants study to explain the increase in the average cost per unit of product. What changes would you suggest to improve Evanss efforts to reduce costs? 4. Explain why the consultant recommended a second look at a rejected design. Provide computational support. What does this tell you about the strategic importance of cost management?Brees, Inc., a manufacturer of golf carts, has just received an offer from a supplier to provide 2,600 units of a component used in its main product. The component is a track assembly that is currently produced internally. The supplier has offered to sell the track assembly for 66 per unit. Brees is currently using a traditional, unit-based costing system that assigns overhead to jobs on the basis of direct labor hours. The estimated traditional full cost of producing the track assembly is as follows: Prior to making a decision, the companys CEO commissioned a special study to see whether there would be any decrease in the fixed overhead costs. The results of the study revealed the following: 3 setups1,160 each (The setups would be avoided, and total spending could be reduced by 1,160 per setup.) One half-time inspector is needed. The company already uses part-time inspectors hired through a temporary employment agency. The yearly cost of the part-time inspectors for the track assembly operation is 12,300 and could be totally avoided if the part were purchased. Engineering work: 470 hours, 45/hour. (Although the work decreases by 470 hours, the engineer assigned to the track assembly line also spends time on other products, and there would be no reduction in his salary.) 75 fewer material moves at 30 per move. Required: 1. Ignore the special study, and determine whether the track assembly should be produced internally or purchased from the supplier. 2. Now, using the special study data, repeat the analysis. 3. Discuss the qualitative factors that would affect the decision, including strategic implications. 4. After reviewing the special study, the controller made the following remark: This study ignores the additional activity demands that purchasing would cause. For example, although the demand for inspecting the part on the production floor decreases, we may need to inspect the incoming parts in the receiving area. Will we actually save any inspection costs? Is the controller right?The KMP Metal Machining Company produces widgets according to customer order. The company has determined that widgets can be produced on three different machine tools: M1, M2, or M3. An analysis of widget production cost reveals the following data: Solve, a. Using a graphical approach, determine the most economical machine tool to use for all order sizes between 1 and 200 units. In other words, determine the subranges within the overall range of 1 to 200 for which each machine tool is preferred. b. Using an algebraic approach, determine the most economical machine tool to use for all order sizes between 1 and 200 units. c. For an order of size 75, which machine tool should be used to produce the order, and what is the total production cost? d. For an order of size 160, assume that the preferred (most economical) machine is unavailable. What penalty (expressed in dollars of additional production cost) must be paid if the second most economical machine is used? The third?
- Witt Recreation Company (WRC) makes e-bikes. The company currently manufactures two models, the Coaster and the Traveler, in one of the WRC factories. Both models require the same assembling operations. The difference between the models is the cost of materials. The following data are available for the second quarter. Number of bikes assembled Materials cost per bike other costs: Direct labor Depreciation and lease Supervision and control Factory administration Operation cost Materials cost Total cost Unit cost Coaster 750 $634 Coaster Traveler 450 $ 1,210 Required: Witt Recreation Company uses operations costing and assigns conversion costs based on the number of units assembled. Compute the cost of each model assembled in the second quarter. Note: Do not round intermediate calculations. Round your final answers to nearest whole number. Total 1,200 Traveler $ 309,000 392,000 257,000 350,000 TotalWitt Recreation Company (WRC) makes e-bikes. The company currently manufactures two models, the Coaster and the Traveler, in one of the WRC factories. Both models require the same assembling operations. The difference between the models is the cost of materials. The following data are available for the second quarter. Number of bikes assembled Materials cost per bike Other costs: Direct labor Depreciation and lease. Supervision and control Factory administration Material cost Operation cost Total cost Unit cost Coaster 770 $ 638 Coaster Traveler 470 $ 1,280 Traveler Required: Witt Recreation Company uses operations costing and assigns conversion costs based on the the direct materials costs. Compute the cost of each model assembled in the second quarter. Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. Total S $ 1,240 $ 305,000 396,000 257,000 346,000 Total 0 0Ragemark Company produces 15,000 units of a component used in freezer. An outside supplier has offered to supply the part for $1.42. The unit cost is: Direct material $0.55 Direct labour 0.2 Variable overhead 0.1 Fixed overhead 2.45 Total unit cost $3.30 Required: 1. What are the alternatives for Ragemark Company? 2. Assume that none of the fixed cost is avoidable. List the relevant cost(s) of internal production and of external purchase. 3. Which alternative is more cost effective and by how much?
- Rooney Manufacturing produces two keyboards, one for laptop computers and the other for desktop computers. The production process is automated, and the company has found activity-based costing useful in assigning overhead costs to its products. The company has identified five major activities involved in producing the keyboards. Activity Materials receiving & handling Production setup Assembly Quality inspection Packing and shipping Activity measures for the two kinds of keyboards follow: Laptops Desktops Labor Cost $ 1,250 1,140 Laptop keyboards Desktop keyboards Material Number of Number of Cost $ 6,100 7,000 Allocation Base Cost of material Number of setups Number of parts Inspection time Number of orders Cost Per Unit Setups 28 10 Allocation Rate 1% of material cost $ 120.00 per setup $ 7.00 per part $ 1.20 per minute $ 8.00 per order Parts Inspection Time 7,100 minutes 4,900 minutes 46 29 Required a. Compute the cost per unit of laptop and desktop keyboards, assuming that Rooney…Witt Recreation Company (WRC) makes e-bikes. The company currently manufactures two models, the Coaster and the Traveler, in one of the WRC factories. Both models require the same assembling operations. The difference between the models is the cost of materials. The following data are available for the second quarter. Number of bikes assembled Materials cost per bike Other costs: Direct labor Depreciation and lease Supervision and control Factory administration. Operation cost Materials cost Total cost Unit cost Coaster Coaster Traveler 750 450 $636 $ 1,212 Required: Witt Recreation Company uses operations costing and assigns conversion costs based on the number of units assembled. Compute the cost of each model assembled in the second quarter. Note: Do not round intermediate calculations. Round your final answers to nearest whole number. 477,000 Traveler 545,400 Total 1,200 $ 311,400 394,400 259,400 352,400 $ TotalTroy Engines, Limited, manufactures a variety of engines for use in heavy equipment. The company has always produced all of the parts for its engines, including the carburetors. An outside supplier offered to sell one type of carburetor to Troy Engines, Limited, for a cost of $40 per unit. To evaluate this offer, Troy Engines, Limited, summarized the cost of producing the carburetor internally as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated Total cost Per Unit 15,000 Units Per Year $ 15 11 2 9* 12 $ 225,000 165,000 30,000 135,000 180,000 $ 49 $ 735,000 *One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value). Required: 1. If the company has no alternative use for the facilities being used to produce the carburetors, what would be the financial advantage (disadvantage) of buying 15,000 carburetors from the outside supplier? 2. Should the…
- Troy Engines, Limited, manufactures a variety of engines for use in heavy equipment. The company has always produced all of the parts for its engines, including the carburetors. An outside supplier offered to sell one type of carburetor to Troy Engines, Limited, for a cost of $40 per unit. To evaluate this offer, Troy Engines, Limited, summarized the cost of producing the carburetor internally as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated Total cost Per Unit $ 18 9 2 9* 12 $ 50 18,000 Units Per Year $ 324,000 162,000 36,000 162,000 216,000 $ 900,000 *One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value). Required: 1. If the company has no alternative use for the facilities being used to produce the carburetors, what would be the financial advantage (disadvantage) of buying 18,000 carburetors from the outside supplier? 2. Should the outside…Gable Company uses three activity cost pools. Each pool has a cost driver. Information for Gable Company follows: Activity Cost Pools Total Cost of Pool Cost Driver Estimated Cost Driver Machining $ 183,300 Number of machine hours 61,100 Designing costs 47,725 Number of design hours 5,750 Setup costs 71,150 Number of batches 500 Suppose that Gable Company manufactures three products, A, B, and C. Information about these products follows: Product A Product B Product C Number of machine hours 21,000 31,000 9,100 Number of design hours 2,300 1,350 2,100 Number of batches 60 180 260 How would you find the total overhead?Troy Engines, Limited, manufactures a variety of engines for use in heavy equipment. The company has always produced all of the parts for its engines, including the carburetors. An outside supplier offered to sell one type of carburetor to Troy Engines, Limited, for a cost of $30 per unit. To evaluate this offer, Troy Engines, Limited, summarized the cost of producing the carburetor internally as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated Total cost Per Unit $ 12 8 2 9* Required 1 Required 2 Required 3 Required 4 12 $43 *One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value). Required: 1. If the company has no alternative use for the facilities being used to produce the carburetors, what would be the financial advantage (disadvantage) of buying 12,000 carburetors from the outside supplier? 2. Should the outside supplier's offer be accepted?…
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