Wilton Company has a JIT system in place. Each manufacturing cell is dedicated to the production of a single product or major subassembly. One cell, dedicated to the production of snowmobiles, has four operations: machining, finishing, assembly, and qualifying

(testing). The machining process is automated, using computers. In this process, the model’s frame and engine are constructed. In finishing, the frame is sandblasted, buffed, and painted. In assembly, the frame and engine are assembled. Finally, each model is tested to ensure operational capability.

For the coming year, the snowmobile cell has the following budgeted costs and cell time (both at theoretical capacity):

Required:
1. Compute the velocity (number of models per hour) that the cell can theoretically achieve. Now, compute the theoretical cycle time (number of hours or minutes per model) that it takes to produce one model.
2. Compute the actual velocity and the actual cycle time.
3. Compute MCE. Comment on the efficiency of the operation.
4. Compute the budgeted conversion cost per minute. Using this rate, compute the conversion cost per model if theoretical output is achieved. Using this measure, compute the conversion cost per model for actual output. Does this product costing approach provide an incentive for the cell manager to reduce cycle time?
Explain

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Budgeted conversion costs $7,750,000 Budgeted materials $9,300,000 Cell time 12,400 hours Theoretical output 9,300 models During the year, the following actual results were obtained: Actual conversion costs Actual materials Actual cell time Actual output $7,750,000 $8,060,000 12,400 hours 7,750 models