Continuous Flow vs. Departmental Manufacturing During the week of August 21, Parley Manufacturing produced and shipped 4,000 units of its machine tools: 1,500 units of Tool SK1 and 2,500 units of Tool SK3. The cycle time for SK1 is 0.73 hour, and the cycle time for SK3 is 0.56 hour. The following costs were incurred: Parley Manufacturing Value-Stream Costs and Production Hours This Week, August 21 Net Hours Materials Salaries Machining Other Total Cost Wages Order processing 400 $4,500 $4,500 Production planning 50 9,000 Purchasing Casting 200 500 600 125 150 $66,750 25,000 18,750 Grinding 6,750 36,375 10,500 12,500 2,625 $9,000 $4,500 10,500 3,000 9,000 6,750 116,625 49,000 31,250 2,625 Drilling Inspection Packaging and shipping 150 2,250 2,250 Invoicing 325 3,000 3,000 Totals 2,500 $110,500 $87,500 $19,500 $7,500 $225,000 Required: 1. Assume that the value-stream costs and total units shipped apply only to one model (a single-product value stream). Calculate the unit cost. Round your answers to two decimal places. $ 56.25 per unit 2. Assume that Tool SK1 is responsible for 60% of the materials cost. Calculate the unit cost for Tool SK1 and Tool SK3. Explain the rationale for using units shipped instead of units produced in the calculation. Round your answers to two decimal places. $ Tool SK1 44.2 x Tool SK3 $ 26.52 x Complete the statement below on the accuracy of the Model A and Model B values computed. Complete the statement below that explains the rationale for using units shipped instead of units produced in the calculation. Using units shipped for the unit calculation motivates managers to reduce inventories. 3. Calculate the unit cost for the two models, using DBC. Round your answers to two decimal places. SK1 $ SK3 $ Explain when and why this cost is more accurate than the unit cost calculated in Requirement 2. DBC approximates ABC cost assignments, better reflecting the consumption of resources by the two products. In this case, the average costing approach is reasonably close to the DBC assignments. Continuous Flow vs. Departmental Manufacturing During the week of August 21, Parley Manufacturing produced and shipped 4,000 units of its machine tools: 1,500 units of Tool SK1 and 2,500 units of Tool SK3. The cycle time for SK1 is 0.73 hour, and the cycle time for SK3 is 0.56 hour. The following costs were incurred: Parley Manufacturing Value-Stream Costs and Production Hours This Week, August 21 Net Hours Materials Salaries Machining Other Total Cost Wages Order processing 400 $4,500 $4,500 Production planning 50 9,000 Purchasing Casting 200 500 600 125 150 $66,750 25,000 18,750 Grinding 6,750 36,375 10,500 12,500 2,625 $9,000 $4,500 10,500 3,000 9,000 6,750 116,625 49,000 31,250 2,625 Drilling Inspection Packaging and shipping 150 2,250 2,250 Invoicing 325 3,000 3,000 Totals 2,500 $110,500 $87,500 $19,500 $7,500 $225,000 Required: 1. Assume that the value-stream costs and total units shipped apply only to one model (a single-product value stream). Calculate the unit cost. Round your answers to two decimal places. $ 56.25 per unit 2. Assume that Tool SK1 is responsible for 60% of the materials cost. Calculate the unit cost for Tool SK1 and Tool SK3. Explain the rationale for using units shipped instead of units produced in the calculation. Round your answers to two decimal places. $ Tool SK1 44.2 x Tool SK3 $ 26.52 x Complete the statement below on the accuracy of the Model A and Model B values computed. Complete the statement below that explains the rationale for using units shipped instead of units produced in the calculation. Using units shipped for the unit calculation motivates managers to reduce inventories. 3. Calculate the unit cost for the two models, using DBC. Round your answers to two decimal places. SK1 $ SK3 $ Explain when and why this cost is more accurate than the unit cost calculated in Requirement 2. DBC approximates ABC cost assignments, better reflecting the consumption of resources by the two products. In this case, the average costing approach is reasonably close to the DBC assignments
