Goldman Company 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 telescopes, has four operations: machining, finishing, assembly and qualifying. For the coming year, the telescope cell has the following budgeted costs and cell time.

Budgeted conversion costs $7,500,000

Budgeted raw materials $9,000,000

Cell time 12,000 hours

Theoretical output 90,000 telescopes

During the year, the following actual results were obtained:

Actual conversion costs $7,500,000

Actual Materials $7,800,000

Actual Cell Time 12,000 hours

Actual Output 75,000 telescopes

1: Compute the velocity that the cell can theoretically achieve. Now compute the theoretical cycle time that it takes to produce one telescope.

2: Compute the actual velocity and the actual cycle time.

3: Compute the budgeted conversion costs per minute. Using this rate, compute the conversion costs per telescope if theoretical output is achieved. Using this measure, compute the conversion costs per telescope for actual output. Does this product costing approach provide an incentive for the cell manager to reduce cycle time? Explain