Directions: Answer the following questions by the due date. Use numerical calculations (if needed) to support your argument. Submit your answers through uploading a Microsoft Word file, Excel file or PDF. Tread-Force Fitness, Inc. assembles and sells elliptical machines. All activity costs are related to labor. Management must remove $2.00 of activity cost from the product in order for it to remain competitive. Activity-based product information for each elliptical machine is as follows: (Hrs per unit) Activity Activity Based Usage x Activity rate / hr = Activity Cost Moving 0.20 $15 $3.00 Motor Assembly 1.50 $20 $30.00 Final Assembly 1.00 $18 $18.00 Testing 0.25 $22 $5.50 Rework 0.40 $22 $8.80 Activity Cost per unit $65.30 The Rework activity involves disassembling and repairing a unit that fails testing. Not all units require rework, but the average is 0.40 hours per unit (usage). Presently the testing is done on the completed assembly, but much of the rework has been related to motors, which can be tested independently prior to adding the motor to the elliptical machine during final assembly. Thus, motor issues can be diagnosed and solved without having to disassemble the complete machine. This change will reduce the average Rework activity usage per unit by one-quarter. Questions: A. Determine the new activity cost per unit under the rework improvement scenario. B. If management had the choice of doing either the rework improvement in (A) or cutting the moving activity in half by improving the product flow, which decision should be implemented and Why?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Directions: Answer the following questions by the due date. Use numerical calculations (if needed) to support your argument. Submit your answers through uploading a Microsoft Word file, Excel file or PDF.
Tread-Force Fitness, Inc. assembles and sells elliptical machines. All activity costs are related to labor. Management must remove $2.00 of activity cost from the product in order for it to remain competitive. Activity-based product information for each elliptical machine is as follows:
(Hrs per unit)
Activity Activity Based Usage x Activity rate / hr = Activity Cost
Moving 0.20 $15 $3.00
Motor Assembly 1.50 $20 $30.00
Final Assembly 1.00 $18 $18.00
Testing 0.25 $22 $5.50
Rework 0.40 $22 $8.80
Activity Cost per unit $65.30
The Rework activity involves disassembling and repairing a unit that fails testing. Not all units require rework, but the average is 0.40 hours per unit (usage). Presently the testing is done on the completed assembly, but much of the rework has been related to motors, which can be tested independently prior to adding the motor to the elliptical machine during final assembly. Thus, motor issues can be diagnosed and solved without having to disassemble the complete machine. This change will reduce the average Rework activity usage per unit by one-quarter.
Questions:
A. Determine the new activity cost per unit under the rework improvement scenario.
B. If management had the choice of doing either the rework improvement in (A) or cutting the moving activity in half by improving the product flow, which decision should be implemented and Why?
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