Case Study: Activity based costing at hot bricks (https://doi.org/10.4135/9781071945797)

Based on the case study, answer the following questions;

1. Using data from December and the current cost assignment method, answer the following questions.

a. What are the conversion costs per unit for each type of product?

b. What are the manufacturing costs per unit for each type of product?

c. What price should be set for each type of unit based on the manufacturing cost?

2. Using data from December and an ABC method, answer the following questions.

a. What are the conversion costs per unit for each type of product?

• How much other cost is assigned to each product type?
• How much fuel cost is assigned to each product type?
• How much grinding cost is assigned to each product type?
• How should the hand-grinding cost be assigned, and what is the cost per unit?

b. What are the manufacturing costs per unit for each type of product?

c. What price should be set for each type of unit based on the manufacturing cost?

3. Using data from December and assigning conversion cost based on material cost answer the following questions.

a. What are the conversion costs per unit for each type of product?

b. What are the manufacturing costs per unit for each type of product?

c. What price should be set for each type of unit based on the manufacturing cost?

4. Which method should be used and why?

5. Which products are over- or under-costed?

6. What signals did the company receive from the marketplace and internally about the company's costs and prices?

7. What decision should the company make about the long-term contract?

8. How do you think the financial incentives impacted decisions about the long-term contract?

9. Mixing costs are currently included as part of "other costs" that are allocated based on the number of units produced and represent $9000 of costs. Currently the mixing process for each product type is performed in batches of exactly 500 units for each type of brick. This is the maximum number of bricks that can be mixed. HBI is considering mixing using batch sizes between 300 units and 500 units, although the cost of each batch will remain the same. First explain why the current approach of assigning mixing costs on a volume basis is appropriate. Next explain how you would assign mixing costs if HBI uses different size batches.

10. A memo summarizing your findings and recommendations.

If you unable to get access to the case study, here is the link: https://www.coursehero.com/u/file/191360833/Case-Study-Activity-Based-Costing-at-Hot-Bricks-IncCSFINALpdf/?userType=student