1. During the week of May 10, Hyrum Manufacturing produced and shipped 16,000 units of its aluminum wheels: 4,000 units of Model A and 12,000 units of Model B. The cycle time for Model A is 1.09 hours and for Model B is 0.47 hour. The following costs and production hours were incurred:

   Hyrum Manufacturing
   Value-Stream Costs and Production Hours
   This Week, May 10
   		Net Hours		Materials		Salaries /Wages		Machining		Other		Total Cost
   Order processing		1,600				$18,000						$18,000
   Production planning		100				36,000						36,000
   Purchasing		800				27,000						27,000
   Stamping		2,000		$267,000		145,500		$36,000		$18,000		466,500
   Welding		2,400		100,000		42,000		42,000		12,000		196,000
   Cladding		500		75,000		50,000						125,000
   Inspection		600				10,500						10,500
   Packaging and shipping		600				9,000						9,000
   Invoicing		1,400				12,000						12,000
   Totals		10,000		$442,000		$350,000		$78,000		$30,000		$900,000

   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. $ per unit

   Complete the statement below on the accuracy of the value computed.

   The cost is

   • very
   • somewhat
   • not very
   accurate as the value stream is dedicated to one product and its costs all belong to that product.

   2. Assume that Model A is responsible for 40% of the materials cost. Calculate the unit cost for Models A and B. Explain the rationale for using units shipped instead of units produced in the calculation. Round your answers to two decimal places.

   Model A	$
   Model B	$

   Complete the statement below on the accuracy of the Model A and Model B values computed.

   When products are heterogeneous or reflect a great deal of variety through custom designing, then using average conversion cost

   • is
   • is not
   a good measure for tracking changes in value-stream efficiency.

   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
   • reduce production time
   • increase quality
   .

   3. Calculate the unit cost for the two models, using DBC. Explain when and why this cost is more accurate than the unit cost calculated in Requirement 2. Round your answers to two decimal places.

   Model A	$
   Model B	$

   Explain when and why this cost is more accurate than the unit cost calculated in Requirement 2. DBC approximates ABC cost assignments and

   • mirrors
   • so better reflects
   • does not reflect
   the consumption of resources by the two products.

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