**Noreen, E., Brewer, P., & Garrison, R. (2016). Managerial accounting for managers. (4th ed.). McGraw-Hill ISBN: 9781308886718
Villeda Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products.
Activity Cost Pools
Setting up batches
Processing customer orders
per customer order
per assembly hour
Data concerning two products appear below:
Number of batches
Number of customer orders
Number of assembly hours
How much overhead cost would be assigned to each of the two products using the company’s activity-based costing system?
Please submit your answers in a table format.
Kerbow Corporation uses part B76 in one of its products. The company’s Accounting Department reports the following costs of producing the 12,000 units of the part that are needed every year.
Depreciation of special equipment
Allocated general overhead
An outside supplier has offered to make the part and sell it to the company for $27.40 each. If this offer is accepted, the supervisor’s salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier’s offer were accepted, only $6,000 of these allocated general overhead costs would be avoided. In addition, the space used to produce part B76 could be used to make more of one of the company’s other products, generating an additional segment margin of $29,000 per year for that product.
a. Prepare a report that shows the effect on the company’s total net operating income of buying part B76 from the supplier rather than continuing to make it inside the company.
b. Which alternative should the company choose?
Allen Corporation’s required rate of return is 14%. The company is considering the purchase of a new machine that will save $10,000 per year in cash operating costs. The machine will cost $39,540 and will have an 8-year useful life with zero salvage value. Straight-line depreciation will be used.
Compute the machine’s internal rate of return. Would you recommend purchase of the machine? Explain.
Ameigh Tech is a for-profit vocational school. The school bases its budgets on two measures of activity (i.e., cost drivers), namely student and course. The school uses the following data in its budgeting:
Fixed element per month
Variable element per student
Variable element per course
In June, the school budgeted for 1,890 students and 146 courses. The actual activity for the month was 2,290 students and 151 courses.
Prepare a report showing the school’s activity variances for June. Label each variance as favorable (F) or unfavorable (U).
Please submit in a table format.
During the most recent month at Luinstra Corporation, queue time was 4.5 days, inspection time was 0.8 day, process time was 1.9 days, wait time was 5.1 days, and move time was 0.7 day.
a. Compute the throughput time.
b. Compute the manufacturing cycle efficiency (MCE).
c. What percentage of the production time is spent in non-value-added activities?
d. Compute the delivery cycle time.
Please write answers as simple mathematical statements.