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?
Manufacturing cycle times, relevant revenues, and relevant costs. The DJ Corporation makes custom specied wire harnesses for the trucking industry only upon receiving rm 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:
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 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.arrow_forwardETS 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_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_forward
- Waiting times, manufacturing cycle times. The Sandstone Corporation uses an injection molding machine to make a plastic product, Z35, after receiving rm orders from its customers. Sandstone estimates that it will receive 60 orders for Z35 during the coming year. Each order of Z35 will take 100 hours of machine time. The annual machine capacity is 8,000 hours.arrow_forwardBorges 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_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
- 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_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_forwardThe process-control division expects to sell 1,250 process-control units this year. From the viewpoint of Sierra Inc. as a whole, should 1,250 Xcel-chips be transferred to the process-control division to replace circuit boards? Show your computations.arrow_forward
- Borges 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_forwardGuthrie Generators manufactures a solenoid that it uses in several of its products. Management is considering whether to continue manufacturing the solenoids or to buy them from an outside source. The following information is available: 1. The company needs 20,000 solenoids per year. The solenoids can be purchased from an outside supplier at a cost of $15 per unit. 2. The unit cost of manufacturing the solenoids is $20, computed as follows: Direct materials Direct labor Factory overhead: Variable Fixed Total manufacturing costs Cost per unit ($400,000 ÷ 20,000 units) 3. If the company decides not to manufacture the solenoids, it will eliminate all of the raw materials and direct labor costs but only 75 percent of the variable factory overhead costs. 4. If the solenolds are purchased from the outside source, machinery used in the production of solenoids will be sold at its book value. Accordingly, no gain or loss will be recognized. The sale of this machinery would also eliminate $5,000…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_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
Fixed Asset Replacement Decision 1235; Author: Accounting Instruction, Help, & How To;https://www.youtube.com/watch?v=LJRzn9K8Nwk;License: Standard Youtube License