QUESTION 9:

Ramsey Company produces speakers (Model A and Model B). Both products pass through two producing departments. Model A's production is much more labour-intensive than that of Model B. Model B is also the more popular of the two speakers. The following data have been gathered for the two products:

	Product Data
	Model A		Model B
Units produced per year	20,000		160,000
Prime costs	$150,000	$1,500,000
Direct labour hours	140,000	300,000
Machine hours	20,000	200,000
Production runs	40	60
Inspection hours	800	1,200
Maintenance hours	10,000	90,000
Overhead costs:
Setup costs	$310,000
Inspection costs	210,000
Machining	240,000
Maintenance	270,000
Total	$1,030,000

Required:

1. Compute the overhead cost per unit for each product by using a plantwide rate based on direct labour hours. In your calculations, round any intermediate rates to two decimal places and use in subsequent computations. Round you final answers to two decimal places.

Model A	$__________
Model B	$__________

2. Using ABC costing, compute the total overhead costs for setup, inspections, machining, and maintenance for Model A and Model B. Then, compute the overhead cost per unit for Model A and Model B. For total costs, round your answers to the nearest dollar, if required. For overhead cost per unit, round to the nearest cent.

	Model A	Model B
Setups (in total dollars)	$__________	$__________
Inspections	$__________	$__________
Machining	$__________	$__________
Maintenance	$__________	$__________
Overhead per unit	$__________	$__________

3. Suppose that Ramsey decides to use departmental overhead rates. There are two departments: Department 1 (machine intensive) with a rate of $3.50 per machine hour and Department 2 (labour intensive) with a rate of $0.90 per direct labour hour. The consumption of these two drivers is as follows:

	Department 1 Machine Hours	Department 2 Direct Labour Hours
Model A	10,000		130,000
Model B	170,000		270,000

Compute the overhead cost per unit for each product by using departmental rates. Round your answers to the nearest cent.

Model A	$__________
Model B	$__________

QUESTION 11:

Goldman Company has structured its operations on a cell-based system. 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 (testing).

For the coming year, the telescope cell has the following budgeted costs and cell time (both at theoretical capacity):

Budgeted conversion costs	$8,000,000
Budgeted raw materials	$7,500,000
Cell time	12,000	hours
Theoretical output	90,000	telescopes

During the year, the following actual results were obtained:

Actual conversion costs	$7,520,000
Actual materials	$7,050,000
Actual cell time	12,000	hours
Actual output	75,000	telescopes

Required:

1. Compute the velocity (number of telescopes per hour) that the cell can theoretically achieve. Now, compute the theoretical cycle time (number of hours or minutes per telescope) that it takes to produce one telescope.

Theoretical velocity (Round to one decimal place)	_______telescopes per hour
Theoretical cycle time (Round to the nearest minute)	_______ per telescope

2. Compute the actual velocity and the actual cycle time. Round your answers to two decimal places.

Actual velocity	_______telescopes per hour
Actual cycle time	_______ minutes

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. Round your answers to two decimal places.

Budgeted conversion costs	$_______
Theoretical conversion costs per telescope	$_______
Actual conversion costs per telescope	$_______

Does this product costing approach provide an incentive for the cell manager to reduce cycle time? (Yes/ or No)