Part 1 Lawn Inc. implemented a JIT manufacturing system. After one year of using JIT the company wants to compare product under the JIT system with product cost under the old system. Lawn Inc. makes 2 products weed eaters and lawn edgers. The unit prime cost under the old system are as follows: Weed Eaters Lawn Edgers S12 Direct materials Direct Labor $45 30 Under the old manufacturing system, the company operated 3 service centers(Maintenance, Materials handling, and Building and grounds) and 2 production departments (Machining and Assembly). Overhead was applied using departmental overhead rates. The direct overhead costs associated with each department for the year preceding the installation of JIT are as follows: Maintenance Materials handling Building and grounds Machining Assembly Total $110,000 90,000 150,000 281,800 175,000 $806,800 Under the old system, the overhead costs of the service departments were allocated directly to the producing departments using the direct method that was covered in AC321 Chapter 7. The overhead rate for the Machining Department was based on machine hours, and the overhead rate for assembly was based on direct labor hours. During the last year of operations for the old system Machining department used 80,000 machine hours Assembly Department used 20,000 direct labor hours Each weed eater required Each lawn edger required 1 machine hour in Machining and 2 machine hour in Machining and 0.25 direct labor hour in Assembly 0.5 direct labor hour in Assembly Bases for allocation of service costs are as follows: Machining Assembly Machine hours 80,000 20,000 100.000 Number of Material Moves 90,000 60.000 150.000 Square Feet of Space 70,000 30,000 100.000 Upon implementing JIT, a manufacturing cell for each product was created to replace the departmental structure. Maintenance and materials handling were both decentralized to the cell level. Cell workers were trained to operate the machines in each cell, assemble the components, maintain the machines, and move the partially completed units from one point to the next within the cell. The company produced and sold 20,000 Weed Eaters 30,000 Lawn Edgers The following costs have been assigned to the manufacturing cells: $ Direct materials Direct labor Direct overhead Allocated overhead Total Weed Eater Cell Lawn Edger Cell 185,000 S 1,140,000 66,000 660,000 99,000 350,500 75,000 75,000 S 425,000 $ 2,225,500 Required: 1. Calculate the allocation ratios you need to develop using the direct method. I have set up a table like we used in AC321 Cornerstone 7.3 page 336 #1. Please remember that Cost accounting is a prerequisite for this course Proportions of Driver Used under Direct Method Maintenance Materials Handling Building Grounds Machining Assembly Maintenance Materials handling Building grounds 2. Using the direct method, allocate the costs of the Maintenance, Materials Handling, and Building grounds departments to the Machining and Assembly departments. I have set up a table like we used in AC321 Cornerstone 7.3 page 336 #2. Support departments Producing Departments Maintenance Materials Handling Building Grounds Machining Assembly Direct costs $110,000 90,000 150,000 281,800 175.000 Allocate: Maintenance Materials handling Building grounds Total after allocation 3. Compute the departmental overhead rates for machining and assembly departments based on the cost drivers provided. In the narrative it was stated that machining department use machine hours and ass These concepts were discussed in chapter 4 on pages 150-153. Machining Assembly Per machine hour Per direct labor hour 4. Allocate the departmental overhead from machining and assembly to the two products Weed eater and lawn edger based on a unit of each of these products. Weed Eater Lawn Edger Part 1 Lawn Inc. implemented a JIT manufacturing system. After one year of using JIT the company wants to compare product under the JIT system with product cost under the old system. Lawn Inc. makes 2 products weed eaters and lawn edgers. The unit prime cost under the old system are as follows: Weed Eaters Lawn Edgers S12 Direct materials Direct Labor $45 30 Under the old manufacturing system, the company operated 3 service centers(Maintenance, Materials handling, and Building and grounds) and 2 production departments (Machining and Assembly). Overhead was applied using departmental overhead rates. The direct overhead costs associated with each department for the year preceding the installation of JIT are as follows: Maintenance Materials handling Building and grounds Machining Assembly Total $110,000 90,000 150,000 281,800 175,000 $806,800 Under the old system, the overhead costs of the service departments were allocated directly to the producing departments using the direct method that was covered in AC321 Chapter 7. The overhead rate for the Machining Department was based on machine hours, and the overhead rate for assembly was based on direct labor hours. During the last year of operations for the old system Machining department used 80,000 machine hours Assembly Department used 20,000 direct labor hours Each weed eater required Each lawn edger required 1 machine hour in Machining and 2 machine hour in Machining and 0.25 direct labor hour in Assembly 0.5 direct labor hour in Assembly Bases for allocation of service costs are as follows: Machining Assembly Machine hours 80,000 20,000 100.000 Number of Material Moves 90,000 60.000 150.000 Square Feet of Space 70,000 30,000 100.000 Upon implementing JIT, a manufacturing cell for each product was created to replace the departmental structure. Maintenance and materials handling were both decentralized to the cell level. Cell workers were trained to operate the machines in each cell, assemble the components, maintain the machines, and move the partially completed units from one point to the next within the cell. The company produced and sold 20,000 Weed Eaters 30,000 Lawn Edgers The following costs have been assigned to the manufacturing cells: $ Direct materials Direct labor Direct overhead Allocated overhead Total Weed Eater Cell Lawn Edger Cell 185,000 S 1,140,000 66,000 660,000 99,000 350,500 75,000 75,000 S 425,000 $ 2,225,500 Required: 1. Calculate the allocation ratios you need to develop using the direct method. I have set up a table like we used in AC321 Cornerstone 7.3 page 336 #1. Please remember that Cost accounting is a prerequisite for this course Proportions of Driver Used under Direct Method Maintenance Materials Handling Building Grounds Machining Assembly Maintenance Materials handling Building grounds 2. Using the direct method, allocate the costs of the Maintenance, Materials Handling, and Building grounds departments to the Machining and Assembly departments. I have set up a table like we used in AC321 Cornerstone 7.3 page 336 #2. Support departments Producing Departments Maintenance Materials Handling Building Grounds Machining Assembly Direct costs $110,000 90,000 150,000 281,800 175.000 Allocate: Maintenance Materials handling Building grounds Total after allocation 3. Compute the departmental overhead rates for machining and assembly departments based on the cost drivers provided. In the narrative it was stated that machining department use machine hours and ass These concepts were discussed in chapter 4 on pages 150-153. Machining Assembly Per machine hour Per direct labor hour 4. Allocate the departmental overhead from machining and assembly to the two products Weed eater and lawn edger based on a unit of each of these products. Weed Eater Lawn Edger