Nasir Manufacturing produces two products in its Sharjah plant: Crystal and Glass. Since inception, Nasir has used only one manufacturing overhead pool to accumulate costs. Manufacturing overhead has been .allocated to products based on direct labor hours Until recently, Nasir was the sole producer of Glass and was able to dictate the selling price. However, last year Zayed Products began marketing a comparable product at a price below the standards costs developed by Nasir. Market share has declined rapidly, and Nasir must decide whether to meet the competitive price or to discontinue the product line. Recognizing that discontinuing the product line would place additional .burden on its remaining product, Crystal Nasir is planning to use the activity-based costing (ABC) to determine if it would show a different cost .structure for the two products The three major indirect costs for manufacturing the products are purchase orders, power usage and setup costs and handling materials. A decision was made to separate the manufacturing department costs into three activity centers: 1) Inspection using number of purchase orders as the cost driver, 2) Fabricating using machine hours as the cost driver and 3) Assembly using number .of setups as the cost driver The annual budget before separation of manufacturing :overhead is shown below in the table The cost structure after separation of overhead into :activity pools is shown below :The activity base rates for the products are shown below :Questions A. By allocating the manufacturing overhead :based on direct labor hours, calculate the Total manufacturing budgeted cost of the -1 manufacturing department (2 marks) Cost per unit for Crystal product ( 3 - -2 marks) Cost per unit for Class product ( 3 marks ) -3 B. After separation of manufacturing overhead into activity pools, compute the total : manufacturing budgeted cost of the Inspection department (1 mark) -1 Fabricating department (1 mark) -2 Assembly department ( 1 mark) -3 C. Using ABC system, calculate the cost per :unit for Crystal (2.5 marks) -1 Glass (2.5 marks) -2 D. Discuss how a decision by Nasir Manufacturing regarding the continued production of Crystal will be affected by the results of your calculations in requirement C. (2 marks) E. If Nasir decides to moves to mass production and focuses on one product (Glass) by using process costing system in highly automated process. Identify the five steps required of the production the cost report if Nasir uses weighted average method. (2 marks) Nasir Manufacturing produces two products in its Sharjah plant: Crystal and Glass. Since inception, Nasir has used only one manufacturing overhead pool to accumulate costs. Manufacturing overhead has been .allocated to products based on direct labor hours Until recently, Nasir was the sole producer of Glass and was able to dictate the selling price. However, last year Zayed Products began marketing a comparable product at a price below the standards costs developed by Nasir. Market share has declined rapidly, and Nasir must decide whether to meet the competitive price or to discontinue the product line. Recognizing that discontinuing the product line would place additional .burden on its remaining product, Crystal Nasir is planning to use the activity-based costing (ABC) to determine if it would show a different cost .structure for the two products The three major indirect costs for manufacturing the products are purchase orders, power usage and setup costs and handling materials. A decision was made to separate the manufacturing department costs into three activity centers: 1) Inspection using number of purchase orders as the cost driver, 2) Fabricating using machine hours as the cost driver and 3) Assembly using number .of setups as the cost driver The annual budget before separation of manufacturing :overhead is shown below in the table The cost structure after separation of overhead into :activity pools is shown below :The activity base rates for the products are shown below :Questions A. By allocating the manufacturing overhead :based on direct labor hours, calculate the Total manufacturing budgeted cost of the -1 manufacturing department (2 marks) Cost per unit for Crystal product ( 3 - -2 marks) Cost per unit for Class product ( 3 marks ) -3 B. After separation of manufacturing overhead into activity pools, compute the total : manufacturing budgeted cost of the Inspection department (1 mark) -1 Fabricating department (1 mark) -2 Assembly department ( 1 mark) -3 C. Using ABC system, calculate the cost per :unit for Crystal (2.5 marks) -1 Glass (2.5 marks) -2 D. Discuss how a decision by Nasir Manufacturing regarding the continued production of Crystal will be affected by the results of your calculations in requirement C. (2 marks) E. If Nasir decides to moves to mass production and focuses on one product (Glass) by using process costing system in highly automated process. Identify the five steps required of the production the cost report if Nasir uses weighted average method. (2 marks)
