Eternal Elegance manufactures luxury watch components and sells them to high-end watchmakers. Previously, most components were crafted manually, and the overhead allocation rate in the prior year was $15 per labor hour ($3,000,000 overhead / 200,000 labor hours). In the current year, overhead increased by $1,000,000 due to the purchase of advanced machinery. However, labor decreased by 50,000 hours because the machinery enables faster production of components. One of Eternal Elegance's smaller clients is Prestige Watch works. Their orders typically require less than 12 labor hours, making these jobs more labor-intensive since the new machinery is not used. a) Assume that in the current year, Eternal Elegance continues to allocate overhead based on labor hours. What would be the overhead cost of a 12-labor-hour job requested by Prestige Watch works? 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?

Eternal Elegance manufactures luxury watch components and sells them to high-end watchmakers. Previously, most components were crafted manually, and the overhead allocation rate in the prior year was $15 per labor hour ($3,000,000 overhead / 200,000 labor hours). In the current year, overhead increased by $1,000,000 due to the purchase of advanced machinery. However, labor decreased by 50,000 hours because the machinery enables faster production of components. One of Eternal Elegance's smaller clients is Prestige Watch works. Their orders typically require less than 12 labor hours, making these jobs more labor-intensive since the new machinery is not used. a) Assume that in the current year, Eternal Elegance continues to allocate overhead based on labor hours. What would be the overhead cost of a 12-labor-hour job requested by Prestige Watch works? 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

Chapter17: Activity Resource Usage Model And Tactical Decision Making

Section: Chapter Questions

Problem 32P: Paladin Company manufactures plain-paper fax machines in a small factory in Minnesota. Sales have...

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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 $2,989,300 and materials costs were $28 per unit. Planned production included 5,728 hours to produce 17,900 motor drives. Actual production for August was 1,860 units, and motor drives shipped amounted to 1,360 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. a $310,620 O b. $312,508 Oc. $149,149 Od $83,500
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