Luxury Shower Products, Inc. makes a variety of ceramic showers and tubs. Luxury has just developed a line of showers and tubs made from a mixture of glass and ceramic. The showers sell for $150 each and have variable costs of $80. The tubs sell for $600 and have variable costs of $450. The glass and ceram showers and tubs require the use of specialized molding equipment. The specialized molding equipmen has 4,050 hours of capacity per year. A shower uses an average of 2 hours of specialized molding equipment time; a tub uses an average of 5 hours of specialized molding equipment time Which product produces the highest Contribution per hour of specialized molding time? Assume that Luxury Shower Products can sell as many as 1,000 showers and 500 tubs per year. How many tubs should EBP produce? You will select 2 correct answers based on the 2 separate questions asked in this problem.

Luxury Shower Products, Inc. makes a variety of ceramic showers and tubs. Luxury has just developed a line of showers and tubs made from a mixture of glass and ceramic. The showers sell for $150 each and have variable costs of $80. The tubs sell for $600 and have variable costs of $450. The glass and ceram showers and tubs require the use of specialized molding equipment. The specialized molding equipmen has 4,050 hours of capacity per year. A shower uses an average of 2 hours of specialized molding equipment time; a tub uses an average of 5 hours of specialized molding equipment time Which product produces the highest Contribution per hour of specialized molding time? Assume that Luxury Shower Products can sell as many as 1,000 showers and 500 tubs per year. How many tubs should EBP produce? You will select 2 correct answers based on the 2 separate questions asked in this problem.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 9PA: Carltons Kitchens makes two types of pasta makers: Strands and Shapes. The company expects to...

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Carltons Kitchens makes two types of pasta makers: Strands and Shapes. The company expects to manufacture 70,000 units of Strands, which has a per-unit direct material cost of $10 and a per-unit direct labor cost of $60. It also expects to manufacture 30.000 units of Shapes, which has a per-unit material cost of $15 and a per-unit direct labor cost of $40. It is estimated that Strands will use 140,000 machine hours and Shapes will require 60,000 machine hours. Historically, the company has used the traditional allocation method and applied overhead at a rate of $21 per machine hour. It was determined that there were three cost pools, and the overhead for each cost pool is shown: The cost driver for each cost pool and its expected activity is shown: A. What is the per-unit cost for each product under the traditional allocation method? B. What is the per-unit cost for each product under ABC costing?
Rolertyme Company manufactures roller skates. With the exception of the rollers, all parts of the skates are produced internally. Neeta Booth, president of Rolertyme, has decided to make the rollers instead of buying them from external suppliers. The company needs 100,000 sets per year (currently it pays 1.90 per set of rollers). The rollers can be produced using an available area within the plant. However, equipment for production of the rollers would need to be leased (30,000 per year lease payment). Additionally, it would cost 0.50 per machine hour for power, oil, and other operating expenses. The equipment will provide 60,000 machine hours per year. Direct material costs will average 0.75 per set, and direct labor will average 0.25 per set. Since only one type of roller would be produced, no additional demands would be made on the setup activity. Other overhead activities (besides machining and setups), however, would be affected. The companys cost management system provides the following information about the current status of the overhead activities that would be affected. (The supply and demand figures do not include the effect of roller production on these activities.) The lumpy quantity indicates how much capacity must be purchased should any expansion of activity supply be needed. The purchase price is the cost of acquiring the capacity represented by the lumpy quantity. This price also represents the cost of current spending on existing activity supply (for each block of activity). Production of rollers would place the following demands on the overhead activities: Producing the rollers also means that the purchase of outside rollers will cease. Thus, purchase orders associated with the outside acquisition of rollers will drop by 5,000. Similarly, the moves for the handling of incoming orders will decrease by 200. The company has not inspected the rollers purchased from outside suppliers. Required: 1. Classify all resources associated with the production of rollers as flexible resources and committed resources. Label each committed resource as a short- or long-term commitment. How should we describe the cost behavior of these short- and long-term resource commitments? Explain. 2. Calculate the total annual resource spending (for all activities except for setups) that the company will incur after production of the rollers begins. Break this cost into fixed and variable activity costs. In calculating these figures, assume that the company will spend no more than necessary. What is the effect on resource spending caused by production of the rollers? 3. Refer to Requirement 2. For each activity, break down the cost of activity supplied into the cost of activity output and the cost of unused activity.
Store−It produces plastic storage bins for household storage needs. The company makes two sizes of bins: large (50 gallon) and regular (35 gallon). Demand for the products is so high that Store−It can sell as many of each size as it can produce. The company uses the same machinery to produce both sizes. The machinery can only be run for 2,900 hours per period. Store−It can produce 11 large bins every hour, whereas it can produce 15 regular bins in the same amount of time. Fixed costs amount to $105,000 per period. Sales prices and variable costs are as follows: regular Large Sales price per unit 8.90 10.10 Variable costs per unit 3.20 4.00 Requirement 1. Which product should Store−It emphasize? Why? Complete the product mix analysis to determine the contribution margin per machine hour. Requirements: 1. Which product should Store−It emphasize? Why? 2. To maximize profits, how many of each size bin should Store−It produce? 3. Given this…
Glassworks makes products for the sandblasting industry. One of the products they make is bags of high-grade sandblasting media that is made from a combination of quartz-sand and recycled ground-glass (cullet). Standard costs and quantities to produce one bag of sandblasting media are as follows: Quantity Cost Quartz-sand 20 kg $4.00 Cullet 5 kg $3.00 80,000 bags of sandblasting media were produced. Actual purchases and inventories were: Beginning Ending Purchases Purchases Inventory Inventory (in kg) ( in $) Quartz-sand 0 kg 0 kg 1,610,000 kg $322,161 Cullet 0 kg 120,000 kg 550,000 kg $286,000 Required: Calculate the following variances: a)Total direct material efficiency variance. b)Total direct material mix variance.…
Marvel Parts, Incorporated, manufactures auto accessories. One of the company's products is a set of seat covers that can be adjusted to fit nearly any small car. The company has a standard cost system in use for all of its products. According to the standards that have been set for the seat covers, the factory should work 980 hours each month to produce 1.960 sets of covers. The standard costs associated with this level of production are: Per Set of Covers $ 16.50 3.50 Total Direct materials Direct labor Varlable manufacturing averhead (based on direct labor-hours) $ 32,340 $6,860 $1,940 1.00 $ 21.00 During August, the factory worked only 1,000 direct labor-hours and produced 2100 sets of covers. The following actual costs were recorded during the month: Per Set of Total Covers Direct materlals (6,000 yards) Direct labor Variable manufacturing overhead $ 34,020 $7,770 $3,990 $ 16.20 3.70 1.90 $ 21.00 At standard, each set of covers should require 25 yards of material. All of the…
StoreAll produces plastic storage bins for household storage needs. The company makes two sizes of bins: large (50 gallon) and regular (35 gallon). Demand for the products is so high that StoreAll can sell as many of each size as it can produce. The company uses the same machinery to produce both sizes. The machinery can be run for only 3,300 hours per period. StoreAll can produce 10 large bins every hour, whereas it can produce 17 regular bins in the same amount of time. Fixed costs amount to $115,000 per period. Sales prices and variable costs are as follows: Regular Large Sales price per unit $ 8.00 $ 10.40 Variable costs per unit 3.50 4.40 Requirements 1. Which product should StoreAll emphasize? Why? 2. To maximize profits, how many of each size bin should StoreAll produce? 3. Given this product mix, what will the company's operating income be?
Marvel Parts, Incorporated, manufactures auto accessories. One of the company's products is a set of seat covers that can be adjusted to fit nearly any small car. The company has a standard cost system in use for all of its products. According to the standards that have been set for the seat covers, the factory should work 980 hours each month to produce 1.960 sets of covers. The standard costs associated with this level of production are: Per Set of Covers $ 16.50 3.50 Total Direct materials Direct labor Varlable manufacturing overhead (based on direct labor-hours) $ 32,340 $ 6,860 $ 1,40 1.00 $ 21.00 During August, the factory worked only 1,000 direct labor-hours and produced 2100 sets of covers. The following actual costs were recorded during the month: Per Set of Total Covers Direct materlals (6,000 yards) Direct labor Variable manufacturing overhead $ 34,020 $7,770 $3,990 $ 16.20 3.70 1.90 $ 21.00 At standard, each set of covers should require 25 yards of material. All of the…
Marvel Parts, Inc., manufactures auto accessories. One of the company's products is a set of seat covers that can be adjusted to fit nearly any small car. The company has a standard cost system in use for all of its products. According to the standards that have been set for the seat covers, the factory should work 1,040 hours each month to produce 2,080 sets of covers. The standard costs associated with this level of production are: Per Set of Covers $40,540 $19.50 3.50 Total Direct materiale Direct labor Variable manufacturing overhead (based on direct labor-hourn) 7.200 2.00 $25.00 E4.160 During August, the factory worked only 600 direct iabor-hours and produced 1,800 sets of covers. The folowing actual costs were recorded during the month: Per Set of Covers 34,200 19.00 3.70 2.30 $25.00 total Direct naterials (5,000 yarde) Direet labor Variable manufacturing overhead $6,640 4,140 At standard, each set of covers should require 2.5 yards of material. All of the materiais purchased…
Marvel Parts, Inc., manufactures auto accessories. One of the company's products is a set of seat covers that can be adjusted to fit nearly any small car. The company has a standard cost system in use for all of its products. According to the standards that have b set for the seat covers, the factory should work 1,045 hours each month to produce 2,090 sets of covers. The standard costs associated with this level of production are: Per Set of Covers $23.70 Total $ 49,533 $ 10,450 Direct materials Direct labor 5.00 Variable manufacturing overhead (based on direct labor-hours) $ 4,598 2.20 $30.90 During August, the factory worked only 800 direct labor-hours and produced 1,900 sets of covers. The following actual costs were recorded during the month: Per Set of Covers $23.40 Total Direct materials (6,500 yards) $ 44,460 $ 9,880 $ 4,560 Direct labor 5.20 Variable manufacturing overhead 2.40 $31.00 At standard, each set of covers should require 3.0 yards of material. All of the materials…
Marvel Parts, Inc., manufactures auto accessories. One of the company’s products is a set of seat covers that can be adjusted to fit nearly any small car. The company has a standard cost system in use for all of its products. According to the standards that have been set for the seat covers, the factory should work 1,000 hours each month to produce 2,000 sets of covers. The standard costs associated with this level of production are: Total Per Setof Covers Direct materials $ 41,400 $ 20.70 Direct labor $ 8,000 4.00 Variable manufacturing overhead (based on direct labor-hours) $ 3,400 1.70 $ 26.40 During August, the factory worked only 1,050 direct labor-hours and produced 2,400 sets of covers. The following actual costs were recorded during the month: Total Per Setof Covers Direct materials (7,500 yards) $ 48,000 $ 20.00 Direct labor $ 10,080 4.20 Variable manufacturing overhead $ 5,040 2.10 $ 26.30 At…
Marvel Parts, Inc., manufactures auto accessories. One of the company's products is a set of seat covers that can be adjusted to fit nearly any small car. The company has a standard cost system in use for all of its products. According to the standards that have been set for the seat covers, the factory should work 1,045 hours each month to produce 2,090 sets of covers. The standard costs associated with this level of production are: Per Set Total $ 49,533 $ 10,450 of Covers Direct materials $23.70 Direct labor 5.00 Variable manufacturing overhead (based on direct labor-hours) $ 4,598 2.20 $30.90 During August, the factory worked only 800 direct labor-hours and produced 1,900 sets of covers. The following actual costs were recorded during the month: Per Set Total $ 44,460 $ 9,880 $ 4,560 of Covers Direct materials (6,500 yards) $23.40 5.20 Direct labor Variable manufacturing overhead 2.40 $31.00 At standard, each set of covers should require 3.0 yards of material. All of the materials…
Steel Company manufactures two kinds of wrought-iron rails: Model E (the elegant) andModel D (the distinctive). Model E rails sell for $59 and cost $50 to make, whereas ModelD rails sell for $48 and cost $41 to make. To make one Model E rail requires 2 hours onMachine A, 1 hour on Machine B, and 4 hours on Machine C. On the other hand, to makeone Model D rail requires 1 hour on A, 2 hours on B, and 5 hours on C. Productionscheduling indicates that during the coming week Machine A will be available for at most30 hours, Machine B for at most 24 hours, and Machine C for at most 72 hours. Find thenumber of each kind of rail to be made in the coming week in order for the company tomaximize its profit. Calculate the maximum profit.