Colby Company makes cases for cell phones of all sizes and types for sale through specialty retailers. The company makes a standard model for the most recent iPhone as well as a deluxe model. Management has designed an ABC system with the following activity cost pools and activity rates for these models: Activity Rates Activity Cost Pool Supporting manufacturing $2 per direct labour-hour $27 per order Order processing Customer service. $68 per customer Management would like an analysis of the profitability of a particular customer, Cell City, which has ordered the following products over the last 12 months: Standard Model Deluxe Model 95 Number of cases 270 Number of orders Direct labour-hours per case. 5 0.25 47 2 0.40 67 Selling price per case $ $ $ 27 Direct materials cost per case $ 24 The company's direct labour rate is $28 per hour. Required: Using the company's ABC system, compute the customer margin of Cell City. Customer margin

Colby Company makes cases for cell phones of all sizes and types for sale through specialty retailers. The company makes a standard model for the most recent iPhone as well as a deluxe model. Management has designed an ABC system with the following activity cost pools and activity rates for these models: Activity Rates Activity Cost Pool Supporting manufacturing $2 per direct labour-hour $27 per order Order processing Customer service. $68 per customer Management would like an analysis of the profitability of a particular customer, Cell City, which has ordered the following products over the last 12 months: Standard Model Deluxe Model 95 Number of cases 270 Number of orders Direct labour-hours per case. 5 0.25 47 2 0.40 67 Selling price per case $ $ $ 27 Direct materials cost per case $ 24 The company's direct labour rate is $28 per hour. Required: Using the company's ABC system, compute the customer margin of Cell City. Customer margin

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter11: Strategic Cost Management

Section: Chapter Questions

Problem 11E: Assign the customer-related activity costs to each customer type using activity rates. Now calculate...

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Kelson Sporting Equipment, Inc., makes two types of baseball gloves: a regular model and a catchers model. The firm has 900 hours of production time available in its cutting and sewing department, 300 hours available in its finishing department, and 100 hours available in its packaging and shipping department. The production time requirements and the profit contribution per glove are given in the following table: Assuming that the company is interested in maximizing the total profit contribution, answer the following: a. What is the linear programming model for this problem? b. Develop a spreadsheet model and find the optimal solution using Excel Solver. How many of each model should Kelson manufacture? c. What is the total profit contribution Kelson can earn with the optimal production quantities? d. How many hours of production time will be scheduled in each department? e. What is the slack time in each department?
Assign the customer-related activity costs to each customer type using activity rates. Now calculate the profitability of each customer category. As a manager, how would you use this information? Emery Company sells small machine parts to heavy equipment manufacturers for an average price of 1.05 per part. There are two types of customers: those who place small, frequent orders and those who place larger, less frequent orders. Each time an order is placed and processed, a setup is required. Scheduling is also needed to coordinate the many different orders that come in and place demands on the plants manufacturing resources. Emery also inspects a sample of the products each time a batch is produced to ensure that the customers specifications have been met Inspection takes essentially the same time regardless of the type of part being produced. Emerys Cost Accounting Department has provided the following budgeted data for customer-related activities and costs (the amounts expected for the coming year): Required: 1. Assign the customer-related activity costs to each category of customers in proportion to the sales revenue earned by each customer type. Calculate the profitability of each customer type. Discuss the problems with this measure of customer profitability.
Colby Company makes cases for cell phones of all sizes and types for sale through specialty retailers. The company makes a standard model for the most recent iPhone as well as a deluxe model. Management has designed an ABC system with the following activity cost pools and activity rates for these models: Activity Cost Pool Activity Rates Supporting manufacturing $ 2 per direct labour-hour Order processing $ 12 per order Customer service $ 53 per customer Management would like an analysis of the profitability of a particular customer, Cell City, which has ordered the following products over the last 12 months: Standard Model Deluxe Model Number of cases 120 20 Number of orders 5 2 Direct labour-hours per case 0.25 0.40 Selling price per case $ 32 $ 52 Direct materials cost per case $ 9 $ 12 The company’s direct labour rate is $12 per hour. Required: Using the company’s ABC system, compute the customer margin…
Colby Company makes cases for cell phones of all sizes and types for sale through specialty retailers. The company makes a standard model for the most recent iPhone as well as a deluxe model. Management has designed an ABC system with the following activity cost pools and activity rates for these models: Activity Cost Pool Supporting manufacturing Order processing Customer service Activity Rates 2 per direct labour-hour 21 per order 75 per customer Management would like an analysis of the profitability of a particular customer, Cell City, which has ordered the following products over the last 12 months: Standard Model Deluxe Model Number of cases 160 35 Number of orders Direct labour-hours per case Selling price per case Direct materials cost per case 2 0.25 0.40 40 65 12 $ 15 The company's direct labour rate is $24 per hour. Required: Using the company's ABC system, compute the customer margin of Cell City.
model for the most recent iPhone as well as a deluxe model. Management has designed an ABC system with the following activity cost pools and activity rates for these models: Check my wark Activity Cost Pool Supporting manufacturing Order processing Activity Rates $ 2 per direct labour-hour $20 per order $61 per custoner Customer service Management would like an analysis of the profitability of a particular customer, Cell City, which has ordered the following products over the last 12 months: Standard Deluxe Model Model 200 Number of cases Number of orders Direct labour-hours per case Selling price per case Direct materials cost per case 6e 2 e. 25 $440 0.40 60 $417 $ 20 The company's direct labour rate is $20 per hour. Required: Using the company's ABC system, compute the customer margin of Cell City.
Thermal Rising, Incorporated, makes paragliders for sale through specialty sporting goods stores. The company has a standard paraglider model, but also makes custom-designed paragliders. Management designed an activity-based costing system with the following activity cost pools and activity rates: Activity Cost Pool Supporting direct labor Order processing Custom design processing Customer service Activity Rate $20 per direct labor-hour $ 188 per order $ 257 per custom design $ 422 per customer Management wants to calculate the profitability of a particular customer, Big Sky Outfitters, which ordered the following products over the last 12 months: Number of gliders Number of orders Number of custom designs Direct labor-hours per glider Selling price per glider Direct materials cost per glider Standard Model Custom Design 11 1 0 26.50 3 3 3 33.00 $ 1,825 $ 2,430 $ 470 $ 576 The company's direct labor rate is $20 per hour. Required: Using the company's activity-based costing system,…
Thermal Rising, Incorporated, makes paragliders for sale through specialty sporting goods stores. The company has a standard paraglider model, but also makes custom-designed paragliders. Management has designed an activity-based costing system with the following activity cost pools and activity rates: Activity Cost Pool Supporting direct labor Order processing Custom design processing Customer service Number of gliders Number of orders Activity Rate $16 per direct labor-hour Management would like an analysis of the profitability of a particular customer, Big Sky Outfitters, which has ordered the following products over the last 12 months: $ 198 per order. $260 per custom design $ 422 per customer Number of custom designs Direct labor-hours per glider Selling price per glider Direct materials cost per glider. The company's direct labor rate is $18 per hour. Customer margin Standard Model 16 1 0 27.50 $ 1,925 $452 Custom Design 2 2 2 32.00 $ 2,490 $582 Required: Using the company's…
Thermal Rising, Incorporated, makes paragliders for sale through specialty sporting goods stores. The company has a standard paraglider model, but also makes custom-designed paragliders. Management designed an activity-based costing system with the following activity cost pools and activity rates: Activity Cost Pool Supporting direct labor Order processing Custom design processing Customer service Activity Rate $ 20 per direct labor-hour $ 190 per order $ 255 per custom design $ 420 per customer Management wants to calculate the profitability of a particular customer, Big Sky Outfitters, which ordered the following products over the last 12 months: Number of gliders Number of orders. Number of custom designs Direct labor-hours per glider Selling price per glider Direct materials cost per glider Standard Model 15 2 0 28.50 $ 1,850 $ 472 Custom Design 3 3 3 33.00 $ 2,400 $ 576 The company's direct labor rate is $20 per hour. Required: Using the company's activity-based costing system,…
Thermal Rising, Incorporated, makes paragliders for sale through specialty sporting goods stores. The company has a standard paraglider model, but also makes custom-designed paragliders. Management designed an activity-based costing system with the following activity cost pools and activity rates: Activity Cost Pool Supporting direct labor Order processing Custom design processing Customer service Activity Rate $ 18 per direct labor-hour $ 192 per order $ 269 per custom design $ 422 per customer Management wants to calculate the profitability of a particular customer, Big Sky Outfitters, which ordered the following products over the last 12 months: Number of gliders Number of orders Number of custom designs Standard Custom Model Design 13 2 1 2 0 2 33.00 Direct labor-hours per glider Selling price per glider Direct materials cost per glider The company's direct labor rate is $18 per hour. Required: 30.50 $ 1,875 $ 444 $ 2,400 $ 576 Using the company's activity-based costing system,…
ExerLight produces two types of exercise treadmils: Regular and Deluxe. The exercise craze and relatod demand is such that ExerLight could use all of its available machine hours producing either model. The two models are processed through the sarne produclion department. E (Click the icon to view the data.) What product mix will maximize operating income? (Hint: Use the allocation of fixed manufacturing overhead to determine the proportion of machine hours used by each product.) Prepare the product mix analysis. Data table ExerLight Product Mix Analysis A B Doluxe Regular Per Unit Sale price per unit 1,050 600 2 Deluxe Regular 111 57 Variable cosls per unit 3 Sale price 1,050 $ 600 Contribution margin per unit 4 Less expenses: Units produced with equivalent number of machine hours 5 Direct materials 260 150 Contribution margin for equivalent number of machine hours Direct labor 80 6 178 Variable manufacturing overhead 282 94 Fixed manufacturing overhead* 144 48 Variable operating…
The KMP Metal Machining Company produces widgets according to customer order. The company has determined that widgets can be produced on three different machine tools: M1, M2, or M3. An analysis of widget production cost reveals the following data: Solve, a. Using a graphical approach, determine the most economical machine tool to use for all order sizes between 1 and 200 units. In other words, determine the subranges within the overall range of 1 to 200 for which each machine tool is preferred. b. Using an algebraic approach, determine the most economical machine tool to use for all order sizes between 1 and 200 units. c. For an order of size 75, which machine tool should be used to produce the order, and what is the total production cost? d. For an order of size 160, assume that the preferred (most economical) machine is unavailable. What penalty (expressed in dollars of additional production cost) must be paid if the second most economical machine is used? The third?
Thermal Rising, Inc., makes paragliders for sale through specialty sporting goods stores. The company has a standard paraglider model, but also makes custom-designed paragliders. Management has designed an activity-based costing system with the following activity cost pools and activity rates: Activity Cost Pool Activity Rate Supporting direct labor $ 20 per direct labor-hour Order processing $ 200 per order Custom design processing $ 258 per custom design Customer service $ 424 per customer Management would like an analysis of the profitability of a particular customer, Big Sky Outfitters, which has ordered the following products over the last 12 months: StandardModel CustomDesign Number of gliders 15 3 Number of orders 2 3 Number of custom designs 0 3 Direct labor-hours per glider 29.50 31.00 Selling price per glider $ 1,700 $ 2,370 Direct materials cost per glider $ 444 $ 576 The company’s direct labor rate is $18 per…