Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Chapter 11, Problem 14E
1.
To determine
Calculate the pre-maintenance cost per unit for the product.
2.
To determine
Calculate the post-purchase cost per unit of the products.
3.
To determine
Describe the reason for maintenance cost per unit is more accurate than pre cost.
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Prior to installing a JIT system, Clarendon Company used machine hours to assign maintenance costs to its three products of 6-inch, 8-inch, and 11-inch insulation. The maintenance costs totaled $400,000 per year. The machine hours used by each product and the quantity produced of each product are as follows:
Machine Hours
Quantity Produced
6-inch
12,000
31,250 rolls
8-inch
20,000
25,000 rolls
11-inch
18,000
12,000 rolls
After installing JIT, three manufacturing cells were created and the cell workers were trained to perform maintenance. Maintenance costs for the three cells still totaled $400,000; however, these costs are now traceable to each cell.
Cell, 6-inch
$100,000
Cell, 8-inch
120,000
Cell, 11-inch
180,000
After installing JIT, the maintenance cost per roll of 6-inch insulation would be
Prior to install a JIT system, Buckner Company, a producer of automobile parts, used maintenance hours to assign maintenance costs to its three products (wheels, rims, and ball bearings). The maintenance costs totaled $12,000,000 per year. The machine hours used by each product and the quantity produced of each product are as follows:
Wheels: Machine hours: 150,000 Qnty produced: 187,500
Rims: Machine hours: 300,000 Qnty produced: 281,250
Bearings: Machine hours: 350,000 Qnty produced: 350,000
After installing JIT, three manufacturing cells were created and the cell workers were trained to perfom preventive maintenance and minor repairs. A full-time maintenance person was also assigned to each cell. Maintenance costs for the three cells still totaled $12,000,000; however, these costs are now treaceable to each cell as follows:
Cell, wheels: $2,640,000
Cell, rims: 4,560,000
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1) Compute the pre-JIT maintenance cost per unit for each product (round answers to two…
Dixon Robotics manufactures three robot models: the A3B4, the BC11, and the C3PO. Dixon allocates manufacturing overhead to each model based on machine-hours. A large portion of the company’s manufacturing overhead costs is incurred by the Maintenance Department. This year, the department anticipates that it will incur $100,000 in total costs. The following estimates pertain to the upcoming year.
Model
Estimated Machine-Hours
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A3B4
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BC11
15,000
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C3PO
5,000
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Ed Smith, Dixon’s cost accountant, suspects that unit costs are being distorted by using a single activity base to allocate Maintenance Department costs to products. Thus, he is considering the implementation of activity-based costing (ABC).
Under the proposed ABC method, the costs of the Maintenance Department would be allocated to the following activity cost pools using the number of work orders as an activity base: (1) the repairs pool and (2) the janitorial…
Chapter 11 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 11 - What does it mean to obtain a competitive...Ch. 11 - What is customer value? How is customer value...Ch. 11 - Prob. 3DQCh. 11 - What are organizational and operational...Ch. 11 - What is the difference between a structural cost...Ch. 11 - What is value-chain analysis? What role does it...Ch. 11 - Prob. 7DQCh. 11 - What are the three viewpoints of product life...Ch. 11 - What are the four stages of the marketing life...Ch. 11 - Prob. 10DQ
Ch. 11 - What are the four stages of the consumption life...Ch. 11 - Life-cycle cost reduction is best achieved during...Ch. 11 - Prob. 13DQCh. 11 - Prob. 14DQCh. 11 - Prob. 15DQCh. 11 - Woodruff Company is currently producing a...Ch. 11 - Ventana Company is a car window repair and...Ch. 11 - Deeds Company sells custom-made machine parts to...Ch. 11 - Kagle design engineers are in the process of...Ch. 11 - Hepworth Company has implemented a JIT system and...Ch. 11 - Keith Golding has decided to purchase a personal...Ch. 11 - Prob. 7ECh. 11 - Classify the following cost drivers as structural,...Ch. 11 - Prob. 9ECh. 11 - Prob. 10ECh. 11 - Assign the customer-related activity costs to each...Ch. 11 - The following series of statements or phrases are...Ch. 11 - Assume that a company has recently switched to JIT...Ch. 11 - Prob. 14ECh. 11 - Potter Company has installed a JIT purchasing and...Ch. 11 - Potter Company has installed a JIT purchasing and...Ch. 11 - Potter Company has installed a JIT purchasing and...Ch. 11 - Prob. 18ECh. 11 - Which of the following is a true statement about...Ch. 11 - Prob. 20ECh. 11 - This year, Hassell Company will ship 4,000,000...Ch. 11 - Prob. 22ECh. 11 - The second stage of customer-based activity-based...Ch. 11 - Evans, Inc., has a unit-based costing system....Ch. 11 - Cortalo, Inc., manufactures riding lawn mowers....Ch. 11 - Moss Manufacturing produces several types of...Ch. 11 - Maxwell Company produces a variety of kitchen...Ch. 11 - Prob. 28PCh. 11 - Nico Parts, Inc., produces electronic products...Ch. 11 - Jolene Askew, manager of Feagan Company, has...Ch. 11 - Homer Manufacturing produces different models of...Ch. 11 - Mott Company recently implemented a JIT...Ch. 11 - Southward Company has implemented a JIT flexible...Ch. 11 - Prob. 34P
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