Reference no: EM13968696

Question # 1

The Geely car company makes three types of cars small, midsize and SUV. There has been some issue with determining a production schedule that is more in line with customer needs. Management has it that making more SUV's will improve the company's profitability and they are asking you to take a look in to this. A consultant has suggested that it would make more sense for them to use the ABC accounting method to determine their production plan. See the tables below and answer all the questions that follow. Also conclude by suggesting which method would be in their best interests.

Table 1

Table 2

 Table 3

Hours Per Month in one 8 hour shift for 250 Workers	60000	hrs
Hourly Labor Costs per worker	$25.00
Overhead Costs	$20,000,000.00
Number of Workers	250	Workers

1. The new production schedule, due to the recession, calls for 859 small car, 375 mid-size car and 280 SUV's to be made.  (See first worksheet in excel to provide all your answers to this question). Using the Traditional method of accounting: 

a. Determine the amount of time it takes to make each product in the production plan?
b. Determine the material costs for this production plan?
c. Determine the Labor costs for this production plan?
d. Determine the Overhead costs for this production plan?
e. Determine the revenue that is generated from this production plan?
f. Determine the profit per product with this production plan?
g. Determine the profit per unit based on the traditional cost allocation method?
h. Determine the Total Profit of the Company based on this production plan?

Table 4.

 

Category	Plant and Equipment	Management	Purchasing	Sales and Shipping
Total Cost	$    7,000,000.00	$           5,000,000.00	$4,500,000.00	$3,500,000.00
Cost Allocation	Square feet	Labor hours	Purchase orders	Customer orders
Total units used	1200000	650000	95573	5030
Small Car	200000	50000	5320	280
Mid Size Car	400000	300000	28500	1500
SUV	600000	300000	61753	3250

Note: The production plan stays the same for both cost allocation methods 2. Using the same production and now the ABC method do the following (See first worksheet in excel to provide all your answers to this question)

a. Determine how overhead cost is allocated for each product base on the department of origin?
b. Determine the profit per product with this production plan?
c. Determine the Profit per unit based on the Activity Based Cost Allocation Method?
d. Determine the Total Profit of the Company based on this production plan?

Question # 2

The table below represents the process taken for the making of an Integrated circuit. You have been hired to review the operations of this facility and also to determine if this facility is performing at its best.

Process	Rate (p/hr)	Time (hr)
Lamination	125.7	8.6
Machining	143.6	5.7
Internal Circuitize	230.3	9.2
Optical Test/Repair - Int	150.5	3
Lamination – Composites	180.8	2.4
External Circuitize	159.9	3.2
Optical Test/Repair - Ext	150.5	1
Drilling	185.9	10.2
Copper Plate	136.4	7.8
Procoat	143.9	9.5
Sizing	126.5	10.2
EOL Test	169.5	2.5

a. How long does it take for a product to go through the entire production line?
b. What is the critical amount of WIP (w0) needed by this facility?
3. If the facility has an average cycle time of 250hrs and an average WIP of 23000 chips what is the average throughput of the line?
4. What is the Practical Worst Case cycle time of this line? Is this line doing well?
5. What is the takt time of the line given that 900 chips have to be made over the course of 890 hrs?
6. Can the production line make this takt time?
7. How many machines will be needed at each station?