achining and Assembly are operating departments; the other departments are service departments. Factory Administration is alloca
ted based on labor-hours; Custodial Services based on square feet occupied; Personnel based on number of employees; and Maintenance based on machine-hours. Required: 1. Allocate service department costs to consuming departments by the step-down method. Then compute predetermined overhead rates in the operating departments using machine-hours as the allocation base in Machining and direct labor-hours as the allocation base in Assembly. 2. Repeat (1) above, this time using the direct method. Again compute predetermined overhead rates in Machining and Assembly. 3. Assume that the company doesn’t bother with allocating service department costs but simply computes a single plantwide overhead rate that divides the total overhead costs (both service department and operating department costs) by the total direct labor-hours. Compute the plantwide overhead rate. 4. Suppose a job requires machine and labor time as follows:
1 answer:
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Answer:
A) USA will not be better off switching to the new dye since the cost is greater than the Fine
B) $118076
C) The reduction in material/fabric cost can be achieved by the reduction in material wastage and in the use of quality materials
while the reduction in labor cost can be achieved by Hiring well trained employees with the necessary skillset
Explanation:
<u>A) Determine If the USA be better off using the new dye </u>
Units of clothes to be dyed = 50,000
Difference in cost = [ 4 ( 1.25 - 0.5 ) ] = 4 * 0.75 = $3
Total cost of using the new dye = 50000 * $3 = $150,000
Fine = $130,000
hence USA will not be better off switching to the new dye since the cost is greater than the Fine
<u>B) Determine by how much overall cost will be reduced at the end of 12 months using Kaizen costing </u>
<em>condition : reduce fabric and labor cost by 1%</em>
Original Monthly Costs without the use of Kaizen Costing =( Total Units/Number of Months)*(Fabric Cost per Unit + Labor Cost per Unit)*Number of Months
= [( 10000 + 50000 )/12 ) * ( 6 + 4 ) ] *12
= [ 5000 * 10 ] *12 = $600,000
Applying kaizen costing
Given: Fabric cost per unit = $6 , Labor cost per unit = $4
Total units of production = 10000 + 50000 = 60,000
Kaizen costing formula per month = [ (cost per unit * total units / 12 ) - ( 1% of cost per unit * total units / 12) ]
Total annual cost using Kaizen costing = $56807.61
difference in cost = $600,000 - $568076 = $31924
with the new dye and Kaizen costing the overall cost will be change by $118076 i.e. ($150,000 - $31924) = <em>$118076 </em>
C ) The reduction in material/fabric cost can be achieved by the reduction in material wastage and in the use of quality materials
while the reduction in labor cost can be achieved by Hiring well trained employees with the necessary skillset
