(a) Concept introduction: Direct Cost: The cost which is directly related to the product and affects those items directly, which contributes to the revenue generation in the business is referred as direct cost. Indirect Cost: The cost which is not directly related to the product and does not affect those items directly, which contributes to the revenue generation in the business is referred as indirect cost. These can be fixed cost or such costs are incurred as a whole and cannot be make relation to manufacturing cost . The reason behind increment in the cost per plaque.

Question

Raneri Trophies Inc. uses a job order cost system for determining the cost to manufacture award products (plaques and trophies). Among the company’s products is an engraved plaque that is awarded to participants who complete a training program at a local business. The company sells the plaques to the local business for $80 each. Each plaque has a brass plate engraved with the name of the participant. Engraving requires approximately 30 minutes per name. Improperly engraved names must be redone. The plate is screwed to a walnut backboard. This assembly takesapproximately 15 minutes per unit. Improper assembly must be redone using a new walnut backboard. During the first half of the year, Raneri had two separate plaque orders. The job cost sheets for the two separate jobs indicated the following information: See Attachment a. Why did the cost per plaque increase from $60 to $68?b. What improvements would you recommend for Raneri Trophies Inc.?

Answer 1

Question

Chapter 10, Problem 10.2MBA

To determine

(a)

Concept introduction:

Direct Cost:

The cost which is directly related to the product and affects those items directly, which contributes to the revenue generation in the business is referred as direct cost.

Indirect Cost:

The cost which is not directly related to the product and does not affect those items directly, which contributes to the revenue generation in the business is referred as indirect cost. These can be fixed cost or such costs are incurred as a whole and cannot be make relation to manufacturing cost.

The reason behind increment in the cost per plaque.

To determine

(b)

Concept introduction:

Direct Cost:

The cost which is directly related to the product and affects those items directly which contributes to the revenue generation in the business is referred as direct cost.

Indirect Cost:

The cost which is not directly related to the product and does not affect those items directly which contributes to the revenue generation in the business is referred as indirect cost. These can be fixed costs or such costs are incurred as a whole and cannot be make relation to manufacturing cost.

The area of concern for HT on the basis of unit costs.

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Raneri Trophies Inc. uses a job order cost system for determining the cost to manufacture award products (plaques and trophies). Among the company’s products is an engraved plaque that is awarded to participants who complete a training program at a local business. The company sells the plaques to the local business for $80 each. Each plaque has a brass plate engraved with the name of the participant. Engraving requires approximately 30 minutes per name. Improperly engraved names must be redone. The plate is screwed to a walnut backboard. This assembly takesapproximately 15 minutes per unit. Improper assembly must be redone using a new walnut backboard. During the first half of the year, Raneri had two separate plaque orders. The job cost sheets for the two separate jobs indicated the following information: See Attachment a. Why did the cost per plaque increase from $60 to $68?b. What improvements would you recommend for Raneri Trophies Inc.?

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