c D E H 1 See Lean Manufacturing Daily Activity 2 3 Electronic Testing Equipment Company is transitioning to a lean manufacturing system and has just frized two order filment value streams (Testing Tools & Replacement Components) 4 Before moving to the value-stream structure, Electronic Testing had a web-developed ABC system and had good success with a better accruacy with product costs 5 Management wants to discontinue ABC because of its intense data demands and the cost of updating to the loan practices 6 They also want to be sure that the average costing approach of valve-stream costing does not produce distorted product costs 7 Management has provided information on the Testing Tools Valve Stream for the coming week 8 9 Conversion Electrometr Quarketor 10 Activity Total Activity Costs Thours used) Thours used) Hours 11 12 Order processing $ 35.000 500 1.250 1,750 13 Purchasing 75,000 200 400 800 14 Lathe 180 400 480 320 800 15 Ming 222.000 800 1.200 2000 16 Drilling 135.000 720 1.680 2.400 17 Assembly 58.000 1.300 700 2,000 18 Inspection 30.000 200 1,000 19 Shipping 18.000 500 900 20 voicing 22.000 800 800 1.600 21 22 Totals 778 400 6.100 6.950 13.050 23 24 25 During this week this vale stream is expected to produce and the the following units of each part 26 27 Electrometr 22.000 28 Quarketor 34.000 29 30 Material costs are computed separately, so we are interested in comparing the conversion cost for ABC Lean 31 32 Complete items (t) through (3) below 800 34 35 (1) Calculate the average unit conversion cost for the two machine parts 36 37 Average Conversion Cost per Unit 38 39 40 ABC vs Lean B15 X 222000 B D 42 43 (2) (a) Calculate the conversion cost per unit for each part, using ABC. 44 (2) (b) Comparing ABC unit cost with the average cost, what would you recommend? Why? 45 46 Calculate Activity Rates: (Round to cents) 47 Order processing 48 Purchasing 49 Lathe 50 Milling 51 Drilling 52 Assembly 53 Inspection 54 Shipping 55 Invoicing 56 57 Conversion Cost Assignment 58 Order processing 59 Purchasing 60 Lathe 61 Milling 62 Drilling 63 Assembly 64 Inspection 65 Shipping 66 Invoicing 67 68 69 Unit Conversion Cost 70 71 68 69 Unit Conversion Cost 70 71 72 73 (3) (a) Calculate the conversion cost per unit using DBC (First, you will need to calculate the cycle time for each product) 74 (3) (b) Based on this outcome, what would you recommendt to the management of Manhandle Tool Company? Why? 75 76 Cycle time product 1 77 78 79 Cycle time product 2 80 81 82 Conversion Cost Rate 83 84 85 Unit Conversion Cost 86 87 88 89 90 91 92 93 c D E H 1 See Lean Manufacturing Daily Activity 2 3 Electronic Testing Equipment Company is transitioning to a lean manufacturing system and has just frized two order filment value streams (Testing Tools & Replacement Components) 4 Before moving to the value-stream structure, Electronic Testing had a web-developed ABC system and had good success with a better accruacy with product costs 5 Management wants to discontinue ABC because of its intense data demands and the cost of updating to the loan practices 6 They also want to be sure that the average costing approach of valve-stream costing does not produce distorted product costs 7 Management has provided information on the Testing Tools Valve Stream for the coming week 8 9 Conversion Electrometr Quarketor 10 Activity Total Activity Costs Thours used) Thours used) Hours 11 12 Order processing $ 35.000 500 1.250 1,750 13 Purchasing 75,000 200 400 800 14 Lathe 180 400 480 320 800 15 Ming 222.000 800 1.200 2000 16 Drilling 135.000 720 1.680 2.400 17 Assembly 58.000 1.300 700 2,000 18 Inspection 30.000 200 1,000 19 Shipping 18.000 500 900 20 voicing 22.000 800 800 1.600 21 22 Totals 778 400 6.100 6.950 13.050 23 24 25 During this week this vale stream is expected to produce and the the following units of each part 26 27 Electrometr 22.000 28 Quarketor 34.000 29 30 Material costs are computed separately, so we are interested in comparing the conversion cost for ABC Lean 31 32 Complete items (t) through (3) below 800 34 35 (1) Calculate the average unit conversion cost for the two machine parts 36 37 Average Conversion Cost per Unit 38 39 40 ABC vs Lean B15 X 222000 B D 42 43 (2) (a) Calculate the conversion cost per unit for each part, using ABC. 44 (2) (b) Comparing ABC unit cost with the average cost, what would you recommend? Why? 45 46 Calculate Activity Rates: (Round to cents) 47 Order processing 48 Purchasing 49 Lathe 50 Milling 51 Drilling 52 Assembly 53 Inspection 54 Shipping 55 Invoicing 56 57 Conversion Cost Assignment 58 Order processing 59 Purchasing 60 Lathe 61 Milling 62 Drilling 63 Assembly 64 Inspection 65 Shipping 66 Invoicing 67 68 69 Unit Conversion Cost 70 71 68 69 Unit Conversion Cost 70 71 72 73 (3) (a) Calculate the conversion cost per unit using DBC (First, you will need to calculate the cycle time for each product) 74 (3) (b) Based on this outcome, what would you recommendt to the management of Manhandle Tool Company? Why? 75 76 Cycle time product 1 77 78 79 Cycle time product 2 80 81 82 Conversion Cost Rate 83 84 85 Unit Conversion Cost 86 87 88 89 90 91 92 93