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Graded Homework-Unit 3- Practical Lean Accounting Chapter 1-Why Lean Accounting? Custom Candles recently embarked on a lean transformation. They currently produce cylindrical C candles in
Graded Homework-Unit 3- Practical Lean Accounting Chapter 1-Why Lean Accounting? Custom Candles recently embarked on a lean transformation. They currently produce cylindrical C" candles in batches of twenty in a production cell depicted below. The standard work-in-process has wax and other materials for a batch of 20 waiting in front of Melting & Mixing, one batch of 20 in each of the four processes (Melting&Mixing, Molding, Finishing. and Label & Pack), and two batches of 20 awaiting processing in Finishing. The process times listed in the diagram are the times required for an entire batch of 20 candles, not the time per individual candle. The current demand for cylindrical "C candles is 2,100 per week (420 per day). Direct materials cost $10.00 per batch of 20 candles. Custom Candles runs one eight-hour shift. It costs $150 per hour ($1,200 per eight-hour day) to run the cell, including direct and indirect labor and other overhead (but excluding the cost of direct materials). Under Custom Candles' standard cost system, the standard rate for direct labor is $15 per hour, and the standard overhead rate is $60 per hour. Each process requires direct labor time equal to the process time. 20 MELTING& MIXING C: 10 minutes R 10 minutes MOLDING C: 8 minutes R: 12 minutes 8 minute war (4 minute setup) 20 20 LABEL & PACK FINISHING C: 16 minutes R: 16 minutes C: 8 minutes R: B minutes wart Custom Candles is considering adding a line of rectangular "R" candles to be produced in this cell. The direct materials cost for rectangular candles is $10.00 per batch of 20. The process times for a batch of 20 rectangular "R" candles are shown below the times for the cylindrical "C candle times in the cell diagram. Custom Candles' management believes they will be able to sell 600 rectangular candles per week (120 per day) at the same price per candle as the cylindrical candles without affecting sales of the cylindrical candles. Their CFO Tom Taper, is concerned about the prices being the same, noting that the standard cost is higher for the rectangular candles. He is also concerned about the new shape adding a four-minute setup to the molding process each time there is a changeover between shapes. Required: Respond to requirements A, B, & C below showing your answers and computations on an Excel spreadsheet. Upload the spreadsheet to Blackboard for the computation part of the assignment. Respond to requirements D&E in a memo to Tom Taper. In your memo to Tom, reference key calculations from your spreadsheet that support your arguments. Upload your memo as a word document to Blackboard for the memo portion of the assignment. What are the standard costs (material, labor and overhead) per candle for the cylindrical "C" candles and the rectangular "R" candles? A)
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