Check my work At a weekly production meeting, Sara Hunter, the manufacturing manager expresses her frustration at trying to schedule production Something isn't right. We build a new plant to take advantage of new manufacturing technology and we struggle to keep it filled. We didn't have this problem a few years ago when we couldn't keep up with demand, but with the current economy, marketing keeps sending orders to the old plant in Fredericton, I know manufacturing, but I guess I must not understand accounting. The latest order that generated discussion among plant management was placed by Lawrence Machine Tool Company, a long-time customer. The order called for 1,000 units of a special rod (P28) used in one of its many products. The order was received by the marketing department. Following the established procedure at Brunswick, the marketing manager checked the product costs for both plants. Because quality and transportation costs would be the same from either plant, a decision was made to produce and ship from the Fredericton plant The cost system at Brunswick is a traditional manufacturing cost system. Plant overhead (including plant depreciation) is allocated to products based on estimated production for the period. Separate overhead rates are computed for each plant Corporate administration costs are allocated to the plants based on the estimated production in the plant for purposes of executive performance measurement. Production is measured by direct labor-hours. Cost and production information for P28 follows. Per unit of P28 Moncton Fredericton Direct material (1 kilogran $25) $ $ Direct labor-hours 4 hours Direct labor wage rate 10 25 25 3 hours $ 9 $ Corporate and plant overhead budgets are as follows: Corporate Marketing RLD Depreciation General administration Plant overhead (before corporate allocations): Supervision Indirect labor Depreciation Miscellaneous Total Estimated production (direct labor-hours): Corporate Administration Moncton Fredericton $150,000 100,000 100,000 150,000 $ 100,000 $150,000 200,000 250,000 600,000 50,000 100,000 150,000 $500,000 $1,000,000 $600,000 100,000 150,000 Prev 1 of 1 III Next