Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 19, Problem 19.35P
Manufacturing cycle times, relevant revenues, and relevant costs. The DJ Corporation makes custom specified wire harnesses for the trucking industry only upon receiving firm orders from its customers. DJ has recently purchased a new machine to make two types of wire harnesses, one for Peterbilt and the other for Kenworth. The annual capacity of the new machine is 5,000 hours. The following information is available for next year:
- 1. Calculate the average manufacturing cycle times per order (a) if DJ manufactures only Peterbilt and (b) if DJ manufactures both Peterbilt and Kenworth.
Required
- 2. Even though Kenworth has a positive contribution margin, DJ’s managers are evaluating whether DJ should (a) make and sell only Peterbilt or (b) make and sell both Peterbilt and Kenworth. Which alternative will maximize DJ’s operating income? Show your calculations.
- 3. What other factors should DJ consider in choosing between the alternatives in requirement 2?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Nash Corporation manufactures and sells custom snowmobiles. From the time an order is placed till
the time the snowmobile reaches the customer averages 50 days. This 50 days is spent as follows:
Wait time: 10 days
Move time: 5 days
Process time: 15 days
Queue time: 15 days
Inspection time: 5 days
What is Nash's manufacturing cycle efficiency (MCE) for its snowmobiles?
A thermoplastic film manufacturer is trying to decide between 5 types of thermoforming molding processes to be added to its molding operation. The estimated costs and revenues are shown below. Compare them on the basis of the IRR method and determine which process should be selected if the company's MARR is 7% per year.
Select the best alternative by performing an IRR incremental analysis.
Justify your answer.
Southeastern Bell stocks a certain switch connector at its central warehouse for supplying field service offices. The yearly demand for these connectors is 15,300 units. Southeastern estimates its
annual holding cost for this item to be $23 per unit. The cost to place and process an order from the supplier is $74. The company operates 300 days per year, and the lead time to receive an order
from the supplier is 2 working days.
a) What is the economic order quantity?
units (round your response to the nearest whole number).
Chapter 19 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Ch. 19 - Describe two benefits of improving quality.Ch. 19 - Prob. 19.2QCh. 19 - Name two items classified as prevention costs.Ch. 19 - Give two examples of appraisal costs.Ch. 19 - Distinguish between internal failure costs and...Ch. 19 - Describe three methods that companies use to...Ch. 19 - Companies should focus on financial measures of...Ch. 19 - Give two examples of nonfinancial measures of...Ch. 19 - Give two examples of nonfinancial measures of...Ch. 19 - When evaluating alternative ways to improve...
Ch. 19 - Distinguish between customer-response time and...Ch. 19 - Prob. 19.12QCh. 19 - Give two reasons why delays occur.Ch. 19 - Companies should always make and sell all products...Ch. 19 - Prob. 19.15QCh. 19 - Rector Corporation is examining its quality...Ch. 19 - Six Sigma is a continuous quality improvement...Ch. 19 - Costs of quality. (CMA, adapted) Osborn, Inc.,...Ch. 19 - Costs of quality analysis. Adirondack Company...Ch. 19 - Costs-of-quality analysis. Safe Travel produces...Ch. 19 - Costs of quality, quality improvement. iCover...Ch. 19 - Prob. 19.22ECh. 19 - Prob. 19.23ECh. 19 - Waiting time. Its a Dogs World (IDW) makes toys...Ch. 19 - Waiting time, service industry. The registration...Ch. 19 - Waiting time, cost considerations, customer...Ch. 19 - Nonfinancial measures of quality and time. For the...Ch. 19 - Nonfinancial measures of quality, manufacturing...Ch. 19 - Statistical quality control. Harvest Cereals...Ch. 19 - Quality improvement, Pareto diagram,...Ch. 19 - Quality improvement, relevant costs, and relevant...Ch. 19 - Quality improvement, relevant costs, and relevant...Ch. 19 - Waiting times, manufacturing cycle times. The...Ch. 19 - Prob. 19.34PCh. 19 - Manufacturing cycle times, relevant revenues, and...Ch. 19 - Compensation linked with profitability, waiting...Ch. 19 - Ethics and quality. Weston Corporation...Ch. 19 - Prob. 19.38P
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- a. What is the EOQ for this component?b. What is the reorder point?c. What is the cycle time?d. What are the total annual holding and ordering costs associated with your recommendedEOQ?arrow_forwardSuppose that a manufacturer plans to produce 78,000 units of product duringa year. A lot of size L, to be determined, is to be made periodically, andevery time a lot is made, it is necessary to set up the appropriate machineryand other production facilities before production starts. The set up cost is thena fixed cost incurred for each lot produced and it is determined as $ 200. Whenproduction commences , the cost of making a unit is constant at $ 7.5 per unit.Inventory cost is to be determined on the basis that it costs $ 0.50 per year tocarry one unit in inventory. Also find how many lots the manufacturerwould make per year and each lot would be produced in how manydays ?.arrow_forwardA plastic manufacturing company that makes four major products seeks to expand its operationsin the coming year. At the beginning of the financial year, the company must decide on which offour new machines A, B, or C to purchase to be able to meet total annual demand. Each machineoperates 14 hours a day, 360 days a year. Machine A costs GH¢43,000, machine B costsGH¢37,500 and machine C costs GH¢75,000. The following product forecasts and processing times have been projected: Demand, units/year Processing times per Unit (Minutes) Product Machine A Machine B Machine CPenholders 16,000 5 3 6Bowls 14,000 4 3 5Cups 6,000 6 5 7Carrier Bags 24,000 3…arrow_forward
- Borges Machine Shop, Inc., has a 1-year contract for the production of 75,000 gear housings for a new off-road vehicle. Owner Luis Borges hopes the contract will be extended and the volume increased next year. Borges has developed costs for three alternatives. They are general-purpose equipment (GPE), flexible manufacturing system (FMS), and expensive, but efficient, dedicated machine (DM) The cost data follow General Purpose Equipment (GPE) Flexible Manufacturing System (FMS) 75,000 $125,000 $15.00 Annual contracted units Annual fixed cost Per unit vanable cost Based on the total cost, the process that is best suited for the current contracted volume is Suppose the contracted volume changes to 275,000 gear housings. Based on the total cost, the process that is best suited for the new volume is Suppose the contracted volume changes to 375,000 gear housings. Based on the total cost, the process that is best suited for the new volume is Dedicated Machine (DM) 75,000 $225,000 $14.00…arrow_forwardAnswer all subparts a to f.if answered within 30mins,it would be helpful Accounting ETS manufactures a component for its computer products. The annual demand for thiscomponent is 2500 units. The annual cost of maintaining inventory is10% per unit and the cost of preparing an order and setting up productionfor the order is $ 50.The machine used to make this part has a production rate of 10,000units per year and the cost is $ 22 per unit.a. Find the EPQ(Economic Production Quantity)A. How long does it take to produce the batch?B. How many batches will be produced per year?C. What is the maximum inventory level?D. What is the total cost per year?E. A supplier offers to sell a similar component for $ 25 per unit with a charge$ 5 per service per order. Should the company accept the offer?F. Find the average inventory level for each situationarrow_forwardBorges Machine Shop, Inc., has a 1-year contractfor the production of 200,000 gear housings for a new off-roadvehicle. Owner Luis Borges hopes the contract will be extendedand the volume increased next year. Borges has developed costsfor three alternatives. They are general-purpose equipment(GPE), flexible manufacturing system (FMS), and expensive, butefficient, dedicated machine (DM). The cost data follow: GENERAL-PURPOSE EQUIPMENT(GPE) FLEXIBLEMANUFACTURINGSYSTEM (FMS) DEDICATEDMACHINE(DM) Annual contractedunits 200,000 200,000 200,000Annual fi xed cost $100,000 $200,000 $500,000Per unit variable cost $ 15.00 $ 14.00 $ 13.00Which process is best for this contract?arrow_forward
- The Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the company’s products is increasing, and management requests assistance from you in determining an economical sales and production mix for the coming year. The company has provided the following data (please see attachment): The following additional information is available: The company’s plant has a capacity of 137,510 direct labor-hours per year on a single-shift basis. The company’s present employees and equipment can produce all five products. The direct labor rate of $8 per hour is expected to remain unchanged during the coming year. Fixed manufacturing costs total $550,000 per year. Variable overhead costs are $2 per direct labor-hour. All of the company’s nonmanufacturing costs are fixed. The company’s finished goods inventory is negligible and can be ignored. Required: 1. How many direct labor hours are used to manufacture one unit of each of the company’s five products? 2. How…arrow_forwardA plastic manufacturing company that makes four major products seeks to expand its operations in the coming year. At the beginning of the financial year, the company must decide on which of four new machines A, B, or C to purchase to be able to meet total annual demand. Each machine operates 14 hours a day, 360 days a year. Machine A costs GH¢43,000, machine B costs GH¢37,500 and machine C costs GH¢75,000. The following product forecasts and processing times have been projected: Demand, units/year Processing times per Unit (Minutes) Product Machine A Machine B Machine CPenholders 16,000 5 3 6Bowls 14,000 4 3 5Cups 6,000 6 5 7Carrier Bags 24,000 3…arrow_forwardA new installation technique has been developed that will enable Washington’s engineers to install 7 additional units of equipment a year. The new method will increase installation costs by $145,000 each year. Should Washington implement the new technique? Show your calculations.arrow_forward
- Answer the following short problems: 1. Wergas, Inc. has determined the following for a given year: Economic order quantity Total cost to place purchase orders for the year Cost to place one purchase order Cost to carry one unit for 1 year What is Wergas' estimated annual usage in units? 5,000 units P 10,000 P 50 P4 2. Alilio Company is planning to build a new plant in Batangas City. The plant is expected to provide additional sales as follows: First Year Second Year Third Year P 2.0 million P2.5 million P 3.0 million (maximum capacity) The financial manager of Alilio estimates that for every peso of sales, P0.25 must be invested in current as sets. If all discounts are taken and bills are paid on time, accounts payable average P 0.04 per peso of sales. Other current liabilities, such as wages payable, typically average P0.05 per peso of sales. Required: a. Estimate the working capital investments required for the new plant in the l", 2nd & 3rd year of operations. b. How do these…arrow_forwardCompany XYZ is conducting an engineering economic analysis to decide whether to make vs purchase position for a necessary element needed ins several products. Now the engineering department has established this information: Option A to purchase 10,000 units annually at a fixed price of $8.50 per unit. The cost of placing the order is insignificant as per the present cost accounting procedure. Option B to manufacture 10,000 units annually with a direct labor cost of $1.50 per unit, manufacturing overhead cost is allotted at 200% of direct labor (which is $3.00 per unit) ) and Direct materials cost at $5.00 per unit. Based on the information, should the unit be purchased or manufactured?arrow_forwardExplain the computation needed. We have been producing product A for several years and look forward to several more years of sales at 500,000 units per year or 2,000 units per day. The present method requires a standard time of 2.0 mins per unit or 30 pcs per hour. At this rate, it takes 33.33 hrs to make 1,000 units. All production will run on the day shift. Present Method and Costs- with a labor rate of $10.00/hr, the labor cost will be $333.30 to produce 1,000 units. The cost of 500,000 units per year would be $166,650.00 in direct labor. New Method and Cost- we have a reduction idea. If we buy this new machine attachment for $1000, the new time standard would be lowered to 1.5 minutes per unit. Will this investment be good for us?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Fixed Asset Replacement Decision 1235; Author: Accounting Instruction, Help, & How To;https://www.youtube.com/watch?v=LJRzn9K8Nwk;License: Standard Youtube License