Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Textbook Question
Chapter 3, Problem 41P
Harriman Industries manufactures engines for the aerospace industry. It has completed manufacturing the first unit of the new ZX-9 engine design. Management believes that the 1,000 labor hours required to complete this unit are reasonable and is prepared to go forward with the manufacture of additional units. An 80 percent cumulative average-time learning curve model for direct labor hours is assumed to be valid. Data on costs are as follows:
Required:
- 1. Set up a table with columns for cumulative number of units, cumulative average time per unit in hours, and the cumulative total time in hours. Complete the table for 1, 2, 4, 8, 16, and 32 units. (Round hours to one significant digit.)
- 2. What are the total variable costs of producing 1, 2, 4, 8, 16, and 32 units? What is the variable cost per unit for 1, 2, 4, 8, 16, and 32 units?
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Northern Defense manufactures radar systems. It has just completed the manufacture of its first newly designed system, RS-32. Manufacturing data for the RS-32 follow:
(Click icon to view data)
Requirement
Calculate the total variable costs of producing 2, 4, and 8 units.
Begin by calculating the total cumulative time in labor-hours. (Round the cumulative average time per unit to the nearest whole number.)
Number of Cumulative average time
Cumulative total time:
units
per unit: Labor-hours
2
2,635
4
2,240
8
1,904
Direct materials
Direct manufacturing labor
Variable manufacturing overhead
Total variable costs
Labor-hours
Now calculate the total variable costs of producing 2, 4, and 8 units.
Variable costs of producing
4 Units
2 Units
5,270
8,960
15,232
8 Units
Data Table
Direct material cost
Direct manufacturing labor time for first unit
Learning curve for manufacturing labor time per radar system
Direct manufacturing labor cost
Variable manufacturing overhead cost
aUsing the formula for…
The management of Wy Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity. The company's controller has provided an example to illustrate how this new system would work. In this example, the allocation base ismachine-hours and the estimated amount of the allocation base for the upcoming year is 50,000 machine-hours. In addition, capacity is 59,000 machine-hours and the actual level of activity for the year is 53,300 machine-hours. All of the manufacturing overhead is fixed and is P1,622,500 per year. For simplicity, it is assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity. It is further assumed that this is also the actual amount of manufacturing overhead for the year. A number of products were worked on during the year, one of which was Product X. This product required 230 machine-hours.
20. If the company bases its predetermined overhead rate on the…
The management of Wy Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity. The company's controller has provided an example to illustrate how this new system would work. In this example, the allocation base ismachine-hours and the estimated amount of the allocation base for the upcoming year is 50,000 machine-hours. In addition, capacity is 59,000 machine-hours and the actual level of activity for the year is 53,300 machine-hours. All of the manufacturing overhead is fixed and is P1,622,500 per year. For simplicity, it is assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity. It is further assumed that this is also the actual amount of manufacturing overhead for the year. A number of products were worked on during the year, one of which was Product X. This product required 230 machine-hours.
22. If the company bases its predetermined overhead rate on the…
Chapter 3 Solutions
Cornerstones of Cost Management (Cornerstones Series)
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