Problem 6 (Theory of Constraints, Throughput Contribution, Relevant Costs) The Zashi Corporation manufactures filing cabinets in two operations machining and finishing. It provides the following information. Machining 100,000 units 80,000 units Finishing 80,000 units 80,000 units Annual capacity Annual production Fixed operating costs (excluding direct materials) Fixed operating costs per unit produced (P6,400,000 ÷ 80,000; P4,000,000 ÷ 80,000) P6,400,000 P4,000,000 P80 per unit P50 per unit Each cabinet sells for P720 and has direct materials costs of P320 incurred at the start of the machining operation. Zashi has no other variable costs. Zashi can sell whatever output it produces. The following requirements refer only to the preceding data. There is no connection between the requirements. Required: 1. Zashi is considering using some modern jigs and tools in the finishing operation that would increase annual finishing output by 1,000 units. The annual cost of these jigs and tool is P300,000. Should Zashi acquire these tools? Show your calculations. 2. The production manager of the Machining Department has submitted a proposal to do faster setups that would increase the annual capacity of the Machining Department by 10,000 units and cost P50,000 per year. Should Zashi implement the change? Show your calculations.
Problem 6 (Theory of Constraints, Throughput Contribution, Relevant Costs) The Zashi Corporation manufactures filing cabinets in two operations machining and finishing. It provides the following information. Machining 100,000 units 80,000 units Finishing 80,000 units 80,000 units Annual capacity Annual production Fixed operating costs (excluding direct materials) Fixed operating costs per unit produced (P6,400,000 ÷ 80,000; P4,000,000 ÷ 80,000) P6,400,000 P4,000,000 P80 per unit P50 per unit Each cabinet sells for P720 and has direct materials costs of P320 incurred at the start of the machining operation. Zashi has no other variable costs. Zashi can sell whatever output it produces. The following requirements refer only to the preceding data. There is no connection between the requirements. Required: 1. Zashi is considering using some modern jigs and tools in the finishing operation that would increase annual finishing output by 1,000 units. The annual cost of these jigs and tool is P300,000. Should Zashi acquire these tools? Show your calculations. 2. The production manager of the Machining Department has submitted a proposal to do faster setups that would increase the annual capacity of the Machining Department by 10,000 units and cost P50,000 per year. Should Zashi implement the change? Show your calculations.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:Problem 6 (Theory of Constraints, Throughput Contribution, Relevant
Costs)
The Zashi Corporation manufactures filing cabinets in two operations
machining and finishing. It provides the following information.
Machining
100,000 units
80,000 units
Finishing
80,000 units
80,000 units
Annual capacity
Annual production
Fixed operating costs (excluding direct
materials)
Fixed operating costs per unit produced
(P6,400,000 ÷ 80,000; P4,000,000
÷ 80,000)
P6,400,000
P4,000,000
P80 per unit
P50 per unit
Each cabinet sells for P720 and has direct materials costs of P320 incurred at
the start of the machining operation. Zashi has no other variable costs. Zashi
can sell whatever output it produces. The following requirements refer only
to the preceding data. There is no connection between the requirements.
Required:
1. Zashi is considering using some modern jigs and tools in the finishing
operation that would increase annual finishing output by 1,000 units. The
annual cost of these jigs and tool is P300,000. Should Zashi acquire these
tools? Show your calculations.
2. The production manager of the Machining Department has submitted a
proposal to do faster setups that would increase the annual capacity of the
Machining Department by 10,000 units and cost P50,000 per year. Should
Zashi implement the change? Show your calculations.
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