4. A plant manager considers the operational cost per hour of five machine alternatives.The cost per hour is sensitive to three potential weather conditions: cold, mild, andwarm. The following table represents the operations cost per hour for each alternative-state of nature combination:Alternatives Cold cost/day Mild cost/day Warm cost/dayMachine 1$45$35$40Machine 2$40$37$42Machine 3$35$30$48Machine 4Machine 5$55$40$20$35Using the optimistic criterion, which alternative is best?$44$40

Introduction: Optimistic criterion is a technique used for making decision under uncertainty. Under…

Answered: 4. A plant manager considers the…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 4CE

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A company anticipates the cost to heat the building will be $21.000. Product A Lakes up 500 square feet of space, while Product B takes up 200 square feet. The activity rate per product using activity-based costing would be which of the following? A. $30/square foot B. $4.20/square foot C. $11/square foot D. $15.20/square foot
Use the following standard cost card for 1 gallon of ice cream to answer the questions. Actual direct costs incurred to make 50 gallons of ice cream: 275 quarts of cream at $1.05 per quart 832 ounces of sugar at $0.075 per ounce 165 minutes of labor at $37 per hour All material used was bought during the current period. A. Compute the material and labor variances. B. Comment on the results and possible causes of the variances.
Use the following information for Exercises 5-44 through 5-46: The following six situations at Diviney Manufacturing Inc. are independent. a. A manual insertion process takes 30 minutes and 8 pounds of material to produce a product. Automating the insertion process requires 15 minutes of machine time and 7.5 pounds of material. The cost per labor hour is 12, the cost per machine hour is 8, and the cost per pound of materials is 10. b. With its original design, a gear requires 8 hours of setup time. By redesigning the gear so that the number of different grooves needed is reduced by 50%, the setup time is reduced by 75%. The cost per setup hour is 50. c. A product currently requires 6 moves. By redesigning the manufacturing layout, the number of moves can be reduced from 6 to 0. The cost per move is 20. d. Inspection time for a plant is 16,000 hours per year. The cost of inspection consists of salaries of 8 inspectors, totaling 320,000. Inspection also uses supplies costing 5 per inspection hour. The company eliminated most defective components by eliminating low-quality suppliers. The number of production errors was reduced dramatically by installing a system of statistical process control. Further quality improvements were realized by redesigning the products, making them easier to manufacture. The net effect was to achieve a close to zero-defect state and eliminate the need for any inspection activity. e. Each unit of a product requires 6 components. The average number of components is 6.5 due to component failure, requiring rework and extra components. Developing relations with the right suppliers and increasing the quality of the purchased component can reduce the average number of components to 6 components per unit. The cost per component is 500. f. A plant produces 100 different electronic products. Each product requires an average of 8 components that are purchased externally. The components are different for each part. By redesigning the products, it is possible to produce the 100 products so that they all have 4 components in common. This will reduce the demand for purchasing, receiving, and paying bills. Estimated savings from the reduced demand are 900,000 per year. 5-45 Driver Analysis Refer to the information for Diviney Manufacturing on the previous page. Required: CONCEPTUAL CONNECTION For each situation, identify the possible root cause(s) of the activity cost (such as plant layout, process design, and product design).
Use the following information for Exercises 5-44 through 5-46: The following six situations at Diviney Manufacturing Inc. are independent. a. A manual insertion process takes 30 minutes and 8 pounds of material to produce a product. Automating the insertion process requires 15 minutes of machine time and 7.5 pounds of material. The cost per labor hour is 12, the cost per machine hour is 8, and the cost per pound of materials is 10. b. With its original design, a gear requires 8 hours of setup time. By redesigning the gear so that the number of different grooves needed is reduced by 50%, the setup time is reduced by 75%. The cost per setup hour is 50. c. A product currently requires 6 moves. By redesigning the manufacturing layout, the number of moves can be reduced from 6 to 0. The cost per move is 20. d. Inspection time for a plant is 16,000 hours per year. The cost of inspection consists of salaries of 8 inspectors, totaling 320,000. Inspection also uses supplies costing 5 per inspection hour. The company eliminated most defective components by eliminating low-quality suppliers. The number of production errors was reduced dramatically by installing a system of statistical process control. Further quality improvements were realized by redesigning the products, making them easier to manufacture. The net effect was to achieve a close to zero-defect state and eliminate the need for any inspection activity. e. Each unit of a product requires 6 components. The average number of components is 6.5 due to component failure, requiring rework and extra components. Developing relations with the right suppliers and increasing the quality of the purchased component can reduce the average number of components to 6 components per unit. The cost per component is 500. f. A plant produces 100 different electronic products. Each product requires an average of 8 components that are purchased externally. The components are different for each part. By redesigning the products, it is possible to produce the 100 products so that they all have 4 components in common. This will reduce the demand for purchasing, receiving, and paying bills. Estimated savings from the reduced demand are 900,000 per year. 5-44 Nonvalue-Added Costs Refer to the information for Diviney Manufacturing on the previous page. Required: Estimate the nonvalue-added cost for each situation.
Shale Remodeling uses time and materials pricing. It reports the following iInformation. Direct labor rate $ 150 per DLH $ 120 per DLH 288 of dairect materials cost Non-materials-related overhead Materials-related overhead Target profit margin (both conversion and direct materials) 208 The time charger per hour of direct labor is: Multiple Choice $288. $333. $324. 204.
Write a linear cost function equation for each of the following conditions. Use y for estimated costsand X for activity of the cost driver. Machine operating costs include $1,000 of maintenance per month, and $15.00 of coolant usagecosts for each day the machinery is in operation.
Shale Remodeling uses time and materials pricing. It reports the following information: Direct labor rate Non-materials-related overhead Materials-related overhead Target profit margin (both conversion and direct materials) $ per DLH 100 $70 per DLH 10% $990. $1,396. $1,168. $1,222. $1,570. 20% of direct materials cost What price should the company quote for a job requiring four direct labor hours and $580 in materials?
The estimated costs of producing 6,000 units of a component are: Per Unit Direct Material Direct Labor $10 8. Applied Variable Factory Overhead 9. Applied Fixed Factory Overhead $1.5 per direct labor dollar The same component can be purchased from market at a price of $29 per unit. If the component is 12 purchased from market, 25% of the fixed factory overhead will be saved. Required: a. Should the component be purchased from the market? b. Being a production manager, provide your logical opinion on choosing between purchasing the component from market or producing in-house
Using the following information for question 8-10 Honeydew Company produces two products, a high-end laptop computer under the label Bunsen Laptops, and an inexpensive desktop computer under the label Beaker Computers. The two products use two overhead activities, with the following costs: Setting up equipment Machining $2,000 12,000 The controller has collected the expected annual prime costs for each product, the machine the setup hours, and the expected production. Bunsen Beaker Direct Labor Direct Materials Expected Production in Units Machine hours $20,000 $5,000 15,000 4,000 2,000 2,000 750 1,500 Setup hours 50 50 8. Calculate Beaker's consumption ratio for setup hours. a. 0.50 b. 0.45 c. 0.90 d. 0.25
Using the following information for question 8-10 Honeydew Company produces two products, a high-end laptop computer under the label Bunsen Laptops, and an inexpensive desktop computer under the label Beaker Computers. The two products use two overhead activities, with the following costs: Setting up equipment Machining $2,000 12,000 The controller has collected the expected annual prime costs for each product, the machine hours, the setup hours, and the expected production. Direct Labor Direct Materials Expected Production in Units Machine hours Setup hours 8. Calculate Beaker's consumption ratio for setup hours. a. 0.50 b. 0.45 c. 0.90 d. 0.25 Bunsen Beaker $20,000 $5,000 15,000 4,000 2,000 2,000 750 1,500 50 50
A value stream has three activities and two products. The units produced and shipped per week are 50 of the deluxe model (Model A) and 150 of the basic model (Model B). The resource con- sumption patterns are shown as follows: Costs of Value- Model A Model B Stream Activities Cell manufacturing Engineering Testing Total $ 76,800 27,200 24,000 2,400 min. 7,200 min. 60 hrs. 260 hrs. 100 hrs. 220 hrs. $128,000 Required: 1. Calculate the ABC product cost for Models A and B. 2. Calculate the value-stream average product cost. Assuming reasonable stability in the con- sumption patterns of the products and product mix, assess how well the products are grouped based on similarity.
Angle Max Industries produces a product which goes through two operations, Assembly and Finishing, before it is ready to be shipped. Next year's expected costs and activities are shown below. Direct labor hours Machine hours Overhead costs Multiple Choice Assume that the Assembly Department allocates overhead using a plantwide overhead rate based on machine hours. How much total overhead will be assigned to a product that requires 2 direct labor hour and 3.30 machine hours in the Assembly Department, and 4.50 direct labor hours and 0.4 machine hours in the Finishing Department? O$17.60. Assembly 180,000 DLH 380,000 MH $380,000 $20.40. Finishing 148,000 DLH 91, 200 MH $562, 400

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