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result in higher quality custom carburetors. As a result, the department's direct labor hours would be reduced by 30 percent, and this extra labor would

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result in higher quality custom carburetors. As a result, the department's direct labor hours would be reduced by 30 percent, and this extra labor would be transferred to departments outside the carburetor division. About 10 percent of the custom work department's over head is variable with respect to direct labor hours. Using July's data: a. Calculate the plant-wide hourly rate (present methods) if the new machine were acquired. Then calculate indicated costs for the custom work department in July, using both this new plant-wide rate and the former $17.61 rate. b. Calculate the hourly rate for the custom work department only (proposed method), assuming the machine were acquired and the proposed costing procedure were adopted. Then calculate indicated costs for the custom work department in July, using both this new rate and the former $ 19.71 rate. C. Under the present costing procedures, what is the impact on indicated custom carburetor costs if the new machine is acquired? What is this impact if the proposed costing procedures are used? What inferences do you then draw concerning the usefulness of the present and proposed methods? 4. Assume that producing a batch of 100 model CS-29carburetors requires 126 hours, distributed by department as shown in Exhibit 3. And $875 worth of materials. Huron sells these carburetors for $32 each. Should the price of a CS-29 carburetor be increased? Should the CS-29 be dropped from the product line? (Answer using both the present and the proposed costing methods.) 5. Assume that Huron also offers a model CS-30 carburetor that is identical to a CS-29 in all important aspects. Including price, but is preferred for some applications because of certain design features. Because of the CS-30's relatively low sales volume, Huron buys certain major components for the CS-30 rather than making them in -house. The total cost of purchased parts for 100 units of model CS-30 is $1,800; the labor required per 100 units is 12, 7, 17 and 35 hours respectively in the casting/stamping, grinding, machining and assembly departments. If a customer ordered 100 carburetors and said that either model CS-29 or CS-30 would be acceptable, which model should Huron ship? Why? (answer using only the proposed costing method) 6. What benefits, if any, do you see to Huron if the proposed costing method is adopted? Consider this question from the standpoint of product pricing b. cost control C. Inventory valuation d. charges to outside departments e. judging departmental performance and f. diagnostic uses of cost data What do you conclude Huron should do regarding the proposal

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