Thermal Mugs, Inc., manufactures various types of leak-proof personal drink carriers. Thermal's T6 container, its most insulated carrier, maintains the temperature of the liquid inside for 6 hours. Thermal has designed a new lid for the T6 carrier that allows for easier drinking and pouring. The cost to produce the new lid is: Direct materials $1 Direct labor $4 Fixed overhead per unit $9 Variable fixed overhead per unit 6 Plato Plastics has approached Thermal and offered to produce the 140,000 lids Thermal will require for current production levels pf the T6 carrier, at a unit price of $17 each. What are the total relevant costs to buy from Plato? Your Answer: Answer

Thermal Mugs, Inc., manufactures various types of leak-proof personal drink carriers. Thermal's T6 container, its most insulated carrier, maintains the temperature of the liquid inside for 6 hours. Thermal has designed a new lid for the T6 carrier that allows for easier drinking and pouring. The cost to produce the new lid is: Direct materials $1 Direct labor $4 Fixed overhead per unit $9 Variable fixed overhead per unit 6 Plato Plastics has approached Thermal and offered to produce the 140,000 lids Thermal will require for current production levels pf the T6 carrier, at a unit price of $17 each. What are the total relevant costs to buy from Plato? Your Answer: Answer

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 29P: Pratt Company produces two replacement parts for a popular line of Blu-ray disc players: Part A and...

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Pratt Company produces two replacement parts for a popular line of Blu-ray disc players: Part A and Part B. Part A is made up of two components, one manufactured internally and one purchased from external suppliers. Part B is made up of three components, one manufactured internally and two purchased from suppliers. The company has two processes: fabrication and assembly. In fabrication, the internally produced components are made. Each component takes 20 minutes to produce. In assembly, it takes 30 minutes to assemble the components for Part A and 40 minutes to assemble the components for Part B. Pratt Company operates one shift per day. Each process employs 100 workers who each work eight hours per day. Part A earns a unit contribution margin of 20, and Part B earns a unit contribution margin of 24 (calculated as the difference between revenue and the cost of materials and energy). Pratt can sell all that it produces of either part. There are no other constraints. Pratt can add a second shift of either process. Although a second shift would work eight hours, there is no mandate that it employ the same number of workers. The labor cost per hour for fabrication is 15, and the labor cost per hour for assembly is 12. Required: 1. Identify the constraints facing Pratt, and graph them. How many binding constraints are possible? What is Pratts optimal product mix? What daily contribution margin is produced by this mix? 2. What is the drummer constraint? How much excess capacity does the other constraint have? Assume that a 1.5-day buffer inventory is needed to deal with any production interruptions. Describe the drum-buffer-rope concept using the Pratt data to illustrate the process. 3. Explain why the use of local labor efficiency measures will not work in Pratts TOC environment. 4. Suppose Pratt decides to elevate the binding constraint by adding a second shift of 50 workers (labor rates are the same as those of the first shift). Would elevation of Pratts binding constraint improve its system performance? Explain with supporting computations.
Firewall Company makes 300-gallon plastic water tanks for a variety of commercial uses. Thestandard per unit material, labor and overhead costs are as follows:Direct materials: 80 pounds @ P 2 P 160Direct Labor: 1.25 hours @ P 16 per hour 20Variable Overhead: 30 minutes of machine time @ P50 per hour 25Fixed overhead: 30 minutes of machine time @ P 40 per hour 20The overhead application rates were developed using a normal capacity of 6,000 units per year.Production is assumed to occur evenly throughout the year. During May 2020 the companyproduced 525 tanks. Actual data for May 2020 are as follows:Direct materials purchased: 46,000 pounds @ P1.92 per poundDirect materials used: 43,050 pounds (all from May’s purchases)Total labor costs: P 10,988.25 for 682.5 hoursVariable overhead incurred: P 13,770 for 270 hours of machine timeFixed overhead incurred: P 10,600 for 270 hours of machine time.Required:A. Determine the following1. Material price variance based on purchases2. Materials…
Firewall Company makes 300-gallon plastic water tanks for a variety of commercial uses. Thestandard per unit material, labor and overhead costs are as follows:Direct materials: 80 pounds @ P 2 P 160Direct Labor: 1.25 hours @ P 16 per hour 20Variable Overhead: 30 minutes of machine time @ P50 per hour 25Fixed overhead: 30 minutes of machine time @ P 40 per hour 20The overhead application rates were developed using a normal capacity of 6,000 units per year.Production is assumed to occur evenly throughout the year. During May 2020 the companyproduced 525 tanks. Actual data for May 2020 are as follows:Direct materials purchased: 46,000 pounds @ P1.92 per poundDirect materials used: 43,050 pounds (all from May’s purchases)Total labor costs: P 10,988.25 for 682.5 hoursVariable overhead incurred: P 13,770 for 270 hours of machine timeFixed overhead incurred: P 10,600 for 270 hours of machine time.Required:A. Determine the following4. Variable overhead spending and efficiency variance5. Fixed…
Waterway has recently started to manufacture RecRobo, a three-wheeled robot that can scan a home for fires and gas leaks and then transmit this information to a mobile phone. The cost structure to manufacture 19,900 RecRobos is as follows: Cost Direct materials ($45 per robot) $895,500 Direct labor ($31 per robot) 616,900 Variable overhead ($8 per robot) 159,200 Allocated fixed overhead ($23 per robot) 457,700 Total $2,129,300 Waterway is approached by Cinrich Inc., which offers to make RecRobo for $83 per unit or $1,651,700. Using incremental analysis, determine whether Waterway should accept this offer under this following independent assumption: (see attachement). In attachement: see dropdown options. Please don't forget to answer: should the offer be accepted or not.
Developing raw material cost standards Lakeway Manufacturing Co.manufactures and sells household cleaning products. The company’s research department has developed a new cleaner for which a standard cost must be determined. The new cleaner is made by mixing 11 quarts of triphate solution and 4 pounds of sobase granules and boiling the mixture for several minutes. After the solution has cooled, 2 ounces of methage are added. This “recipe” produces 10 quarts of the cleaner, which is then packaged in 1-quart plastic dispenser bottles. Rawmaterial costs are:Triphate solution . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.30 per quartSobase granules . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.74 per poundMethage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.20 per ounceBottle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.12 eachRequired:a. Using the preceding data, calculate the raw material cost for one bottle of…
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.…
Sensor Systems manufactures an optical switch that it uses in its final product. The switch has the following manufacturing costs per unit: LOADING... (Click the icon to view the costs.) Direct materials $7.00 Direct labor 2.00 Variable overhead 8.00 Fixed overhead 6.50____________________________ Manufacturing product cost $23.50__________________________ _________________________________                                                                         LOADING... (Click the icon to view additional information.) Another company has offered to sell Sensor Systems the switch for $19.00 per unit. If Sensor Systems buys the switch from the outside supplier, the idle manufacturing facilities cannot be used for any other purpose, yet none of the fixed costs are avoidable. Prepare an outsourcing analysis to determine whether Sensor Systems should make or buy the switch. (For the Difference column, use a minus sign or parentheses only when the cost of outsourcing…
Mattress Comfort Corporation manufactures two types of mattresses, Dreamer and          Sleeper. Dreamer has a complex design that uses gel-filled compartments to provide support. Sleeper is simpler to manufacture and uses conventional padding. Last year, Mattress Comfort had the following revenues and costs:                                                                        Dreamer          Sleeper            Total Revenue                                                       $1,200,000         $900,000      $2,100,000 Direct Materials                                              500,000         450,000         950,000 Direct Labor                                                   250,000         200,000         450,000 Indirect Costs:             Administration                                                                                       80,000             Production Setup…
Mattress Comfort Corporation manufactures two types of mattresses, Dreamer and Sleeper. Dreamer has a complex design that uses gel-filled compartments to provide support. Sleeper is simpler to manufacture and uses conventional padding. Last year, Mattress Comfort had the following revenues and costs:                                                                        Dreamer       Sleeper       Total Revenue                                          $1,200,000 $900,000      $2,100,000 Direct Materials                              500,000    450,000    950,000 Direct Labor                                             250,000    200,000    450,000 Indirect Costs:          Administration                                                                    80,000          Production Setup                                                                 100,000          Quality Control                                                                    120,000…
Gerber Clothing Inc. has designed a rain suit for outdoor enthusiasts that is about to be introduced on the market. A standard cost card has been prepared for the new suit, as follows: Standard Quantity or hours Standard price or Rate Standard Direct materials 2.2 metres Direct labour 1.0 hours Manufacturing overhead (1/6 variable) 1.0 hours $ 15 per metre 33 per hour 21 per hour Cost $33.00 Total standard cost per suit 33.00 21.00 $87.00 a. The only variable selling and administrative costs will be $6 per suit for shipping. Fixed selling and administrative costs will be as follows (per year): Salaries Advertising and other Total $ 35,400 157,000 $192,400 b. Since the company manufactures many products, it is felt that no more than 10,500 hours of labour time per year can be devoted to production of the new suits. c. An investment of $550,000 will be necessary to carry inventories and accounts receivable and to purchase some new equipment. The company wants a 20% ROI in new product…
Jobs, Inc. has recently started the manufacture of Tri-Robo, a three-wheeled robot that can scan a home for fires and gas leaks and then transmit this information to a smartphone. The cost structure to manufacture 20,400 Tri-Robos is as follows. Cost Direct materials ($51 per robot) $1,040,400 Direct labor ($39 per robot) 795,600 Variable overhead ($7 per robot) 142,800 Allocated fixed overhead ($29 per robot) 600,000 Total $2,578,800 Jobs is approached by Tienh Inc., which offers to make Tri-Robo for $116 per unit or $2,366,400.Following are independent assumptions. Assume that $405,000 of the fixed overhead cost can be avoided. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Make Buy Net IncomeIncrease(Decrease) Direct materials $enter a dollar amount $enter a dollar amount $enter a dollar amount Direct labor enter a dollar amount…
Farmers Plus uses three departments to produce plastic handles for screwdrivers. Forming the handles require mixing the raw materials, molding and drying. After the drying process, the screwdrivers are completed by assembling the handles and the shanks and packing for shipment. The following information relates to the molding process: There was no opening WIP stock8,000 kilos of material at $43.08 per kilo entered the processDirect materials added$29,000Direct wages incurred22,700Production overhead55,100Normal loss is 4% of inputA quality control check was done at the end of the molding process and 350 handles were rejected as spoilage. Spoiled units, regardless of their degree of completion, are sold at $45.00 each, and it is company’s policy to credit the process account with the scrap value of the normal loss units.Closing WIP was 800 units but these were incomplete, having reached the following percentages of completion for each of the elements of cost listed Input…