Diamonds, Etc. manufactures jewelry settings and sells them to retail stores. In the past, most settings were made by hand, and the overhead allocation rate in the prior year was $12 per labor hour ($2,400,000 overhead / 200,000 labor hours). In the current year, overhead increased by $800,000 due to the acquisition of equipment. Labor, however, decreased by 40,000 hours because the equipment allows rapid creation of the settings. One of the company's many customers is a local jewelry store, Jasmine's Fine Jewelry. This store is relatively small, and the time to make an order of jewelry pieces is typically less than 10 labor hours. On such jobs (less than 10 labor hours), the new equipment is not used, and thus the jobs are relatively labor-intensive. a). Assume that in the current year, the company continues to allocate overhead based on labor hours. What would be the overhead cost of a 10-labor-hour job requested by Jasmine's Fine Jewelry? How does this compare to the overhead cost charged to such a job in the prior year? b). Assume that the price charged for small jobs does not change in the current year. Are small jobs less profitable than they were in the past?

Diamonds, Etc. manufactures jewelry settings and sells them to retail stores. In the past, most settings were made by hand, and the overhead allocation rate in the prior year was $12 per labor hour ($2,400,000 overhead / 200,000 labor hours). In the current year, overhead increased by $800,000 due to the acquisition of equipment. Labor, however, decreased by 40,000 hours because the equipment allows rapid creation of the settings. One of the company's many customers is a local jewelry store, Jasmine's Fine Jewelry. This store is relatively small, and the time to make an order of jewelry pieces is typically less than 10 labor hours. On such jobs (less than 10 labor hours), the new equipment is not used, and thus the jobs are relatively labor-intensive. a). Assume that in the current year, the company continues to allocate overhead based on labor hours. What would be the overhead cost of a 10-labor-hour job requested by Jasmine's Fine Jewelry? How does this compare to the overhead cost charged to such a job in the prior year? b). Assume that the price charged for small jobs does not change in the current year. Are small jobs less profitable than they were in the past?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

Problem 2CE: Corazon Manufacturing Company has a purchasing department staffed by five purchasing agents. Each...

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Calculate the relevant cost per unit.
Sifton Electronics Corporation manufactures and assembles electronic motor drives for video cameras. The company assembles the motor drives for several accounts. The process consists of a lean cell for each customer. The following information relates to only one customer's lean cell for the coming year. For the year, projected labor and overhead was $5,154,500 and materials costs were $34 per unit. Planned production included 5,408 hours to produce 16,900 motor drives. Actual production for August was 1,820 units, and motor drives shipped amounted to 1,400 units. Conversion costs are applied based on units of production From the foregoing information, determine the amount of the conversion costs charged to Raw and In Process Inventory during August. Oa. $555,100 Ob. $556,954 Oc. $235,349 Od. $128,100
Sifton Electronics Corporation manufactures and assembles electronic motor drives for video cameras. The company assembles the motor drives for several accounts. The process consists of a lean cell for each customer. The following information relates to only one customer's lean cell for the coming year. For the year, projected labor and overhead was $5,627,900 and materials costs were $32 per unit. Planned production included 5,344 hours to produce 16,700 motor drives. Actual production for August was 1,500 units, and motor drives shipped amounted to 1,480 units. Conversion costs are applied based on units of production From the foregoing information, determine the amount of the conversion costs charged to Raw and In Process Inventory during August. O $606,600 Ob $608,432 O $247,163 Od $107,840
Sifton Electronics Corporation manufactures and assembles electronic motor drives for video cameras. The company assembles the motor drives for several accounts. The process consists of a lean cell for each customer. The following information relates to only one customer's lean cell for the coming year. For the year, projected labor and overhead was $4,847,000 and materials costs were $33 per unit. Planned production included 5,920 hours to produce 18,500 motor drives. Actual production for August was 1,850 units, and motor drives shipped amounted to 1,400 units. Conversion costs are applied based on units of production From the foregoing information, determine the cell conversion cost rate. Oa. $818.75 Ob. $262.00 Oc. $2,620.00 Od. $3,462.14
Sifton Electronics Corporation manufactures and assembles electronic motor drives for video cameras. The company assembles the motor drives for several accounts. The process consists of a lean cell for each customer. The following information relates to only one customer's lean cell for the coming year. For the year, projected labor and overhead was $3,591,000 and materials costs were $34 per unit. Planned production included 6,048 hours to produce 18,900 motor drives. Actual production for August was 1,800 units, and motor drives shipped amounted to 1,500 units. Conversion costs are applied based on units of production From the foregoing information, determine the cell conversion cost rate. a.$190.00 b.$593.75 c.$1,995.00 d.$2,394.00
Tarnish Industries produces miniature models of farm equipment. These collectibles are in great demand. It takes two operations, molding and finishing, to complete the miniatures. Next year's expected activities are shown in the following table: Molding Finishing Direct labor hours 75,000 DLH 160,500 DLH Machine hours 98,000 MH 81,500 MH Tarnish Industries uses departmental overhead rates and is planning on a $1.80 per direct labor hour overhead rate for the Finishing department. Compute the budgeted manufacturing overhead cost for the Finishing department given the information shown in the table.
Olney Recycling recycles newsprint, cardboard, and so forth, into recycled packaging materials. For the coming year, attached in screen shot below
Sifton Electronics Corporation manufactures and assembles electronic motor drives for video cameras. The company assembles the motor drives for several accounts. The process consists of a lean cell for each customer. The following information relates to only one customer's lean cell for the coming year. For the year, projected labor and overhead was $3,961,700 and materials costs were $28 per unit. Planned production included 5,536 hours to produce 17,300 motor drives. Actual production for August was 1,920 units, and motor drives shipped amounted to 1,460 units. Conversion costs are applied based on units of production From the foregoing information, determine the production costs transferred to Cost of Goods Sold during August. a.$441,628 b.$493,440 c.$375,220 d.$191,160
Rico Company produces custom-made machine parts. Rico recently has implemented an activity-based management (ABM) system with the objective of reducing costs. Rico has begun analyzing each activity to determine ways to increase its efficiency. Setting up equipment was among the first group of activities to be carefully studied. The study revealed that setup hours was a good driver for the activity. During the last year, the company incurred fixed setup costs of $860,200 (salaries of 17 employees). The fixed costs provide a capacity of 39,100 hours (2,300 per employee at practical capacity). The setup activity was viewed as necessary, and the value- added standard was set at 2,300 hours. Actual setup hours used in the most recent period were 37,110. Required: 1. Calculate the volume and unused capacity variances for the setup activity. Enter all amounts as positive values. Volume Variance 22 Unused Capacity Variance $ Show Me How 2. Prepare a report that presents value-added, non varue…
Sifton Electronics Corporation manufactures and assembles electronic motor drives for video cameras. The company assemble. the motor drives for several accounts. The process consists of a lean cell for each customer. The following information relates t only one customer's lean cell for the coming year. For the year, projected labor and overhead was $3,120,000 and materials costs were $31 per unit. Planned production included 5,120 hours to produce 16,000 motor drives. Actual production for August was 1,870 units, and motor drives shipped amounted to 1,480 units. Conversion costs are applied based on units of production From the foregoing information, determine the cell conversion cost rate. a. $2,108.11 b. $195.00 c. $1,668.45 d. $609.38
Corazon Manufacturing Company has a purchasing department staffed by five purchasing agents. Each agent is paid 28,000 per year and is able to process 4,000 purchase orders. Last year, 17,800 purchase orders were processed by the five agents. Required: 1. Calculate the activity rate per purchase order. 2. Calculate, in terms of purchase orders, the: a. total activity availability b. unused capacity 3. Calculate the dollar cost of: a. total activity availability b. unused capacity 4. Express total activity availability in terms of activity capacity used and unused capacity. 5. What if one of the purchasing agents agreed to work half time for 14,000? How many purchase orders could be processed by four and a half purchasing agents? What would unused capacity be in purchase orders?
Baker, Inc., supplies wheels for a large bicycle manufacturing company. The bicycle company has recently requested that Baker decrease its delivery time. Baker made a commitment to reduce the lead time for delivery from seven days to one day. To help achieve this goal, engineering and production workers had made the commitment to reduce time for the setup activity (other activities such as moving materials and rework were also being examined simultaneously). Current setup times were 12 hours. Setup cost was 600 per setup hour. For the first quarter, engineering developed a new process design that it believed would reduce the setup time from 12 hours to nine hours. After implementing the design, the actual setup time dropped from 12 hours to seven hours. Engineering believed the actual reduction was sustainable. In the second quarter, production workers suggested a new setup procedure. Engineering gave the suggestion a positive evaluation, and they projected that the new approach would save an additional six hours of setup time. Setup labor was trained to perform the new setup procedures. The actual reduction in setup time based on the suggested changes was four hours. Required: 1. What kaizen setup standard would be used at the beginning of each quarter? 2. Describe the kaizen subcycle using the two quarters of data provided by Baker. 3. Describe the maintenance subcycle for setups using the two quarters of data provided by Baker. 4. How much non-value-added cost was eliminated by the end of two quarters? Discuss the role of kaizen costing in activity-based management. 5. Explain why kaizen costing is compatible with activity-based responsibility accounting while standard costing is compatible with financial-based responsibility accounting.