Cycle Time, Velocity, Product Costing

Mulhall, Inc., 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 mopeds, has four operations: machining, finishing, assembly, and qualifying (testing). The machining process is automated, using computers. In this process, the models 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 moped cell has the following budgeted costs and cell time (both at theoretical capacity):

Budgeted conversion costs	$4,952,640
Budgeted materials	$18,552,000
Cell time	37,520
Theoretical output	23,450	models

During the year, the following actual results were obtained:

Actual conversion costs	$4,952,640
Actual materials	$4,023,000
Actual cell time	37,520	hours
Actual output	18,760	models

Required:

1. Compute the velocity (number of models per hour) that the cell can theoretically achieve. If required, round your answer to two decimal places. fill in the blank 1 model per hour

Now, compute the theoretical cycle time (number of minutes per model) that it takes to produce one model. In your calculations, do not round the theoretical velocity. fill in the blank 2 minutes per model

2. Compute the actual velocity and the actual cycle time. If required, round your actual velocity answer to three decimal places.

Actual velocity	fill in the blank 3	model per hour
Actual cycle time	fill in the blank 4	minutes per model

3. Compute MCE. If required, round your answer to two decimal places. fill in the blank 5

Comment on the efficiency of the operation.

4. Compute the budgeted conversion cost per minute. If required, round your answer to the nearest cent. $fill in the blank 7 per minute

Using this rate, compute the conversion cost per model if theoretical output is achieved. $fill in the blank 8 per model

Using this measure, compute the conversion cost per model for actual output. $fill in the blank 9 per model

Does this product costing approach provide an incentive for the cell manager to reduce cycle time?