Manufactures multiple types of products

Assignment Help Accounting Basics
Reference no: EM131128607

(ABC; decision making) Casito Corp. manufactures multiple types of products; however, most of the company's sales are from Product #347 and Product #658. Product #347 has been a standard in the industry for several years; the market for this product is competitive and price sensitive. Casito plans to sell 65,000 units of Product #347 in 2011 at a price of $150 per unit. Product #658 is a recent addition to Casito's product line. This product incorporates the latest technology and can be sold at a premium price; the company expects to sell 40,000 units of this product in 2011 for $300 per unit.

Casito's management group is meeting to discuss 2011 strategies, and the current topic of conversation is how to spend the sales and promotion budget. The sales man-ager believes that the market share for Product #347 could be expanded by concentrating Casito's promotional efforts in this area. However, the production manager wants to target a larger market share for Product #658. He says, "The cost sheets I get show that the contribution from Product #658 is more than twice that from Product #347.

I know we get a premium price for this product; selling it should help overall profit-ability." Casito has the following costs for the two products:


Product #347

Product #658

Direct material

$80

$140

Direct labor

1.5 hours

4.0 hours

Machine time

0.5 hours

1.5 hours

Variable manufacturing overhead is currently applied on the basis of direct labor hours. For 2011, variable manufacturing overhead is budgeted at $1,120,000 for a total of 280,000 direct labor hours. The hourly rates for machine time and direct labor are $10 and $14, respectively. Casito applies a material handling charge at10 percent of material cost; this material handling charge is not included in variable manufacturing overhead. Total 2011 expenditures for materials are budgeted at$10,800,000.

Marc Alexander, Casito's controller, believes that before management decides to allocate marketing funds to individual products, it might be worthwhile to look at these products on the basis of the activities involved in their production. Alexander has prepared the following schedule to help the management group understand this concept:


Budgeted


Annual Activity for


Cost

Cost Driver

Cost Driver

Material overhead




Procurement

$ 400,000

Number of parts

4,000,000 parts

Production scheduling

220,000

Number of units

110,000 units

Packaging and shipping

440,000

Number of units

110,000 units


$1,060,000



Variable overhead




Machine setup

$ 446,000

Number of setups

278,750 setups

Hazardous waste disposal

48,000

Pounds of waste

16,000 pounds

Quality control

560,000

Number of inspections

160,000 inspections

General supplies

66,000

Number of units

110,000 units


$1,120,000



Manufacturing




Machine insertion

$1,200,000

Number of parts

3,000,000 parts

Manual insertion

4,000,000

Number of parts

1,000,000 parts

Wave soldering

132,000

Number of units

110,000 units


$5,332,000



REQUIRED PER UNIT



Product #347

Product #658

Parts

25

55

Machine insertions of parts

24

35

Manual insertions of parts

1

20

Machine setups

2

3

Hazardous waste

0.02 lb

0.35 lb

Inspections

1

2

Alexander wants to calculate a new cost, using appropriate cost drivers, for each product. The new cost drivers would replace the direct labor, machine time, and overhead costs in the current costing system.

a. Identify at least four general advantages associated with activity-based costing.

b. On the basis of current costs, calculate the total contribution expected in 2011 for

1. Product #347.

2. Product #658.

c. On the basis of activity-based costs, calculate the total contribution expected in 2011 for

1. Product #347.

2. Product #658.

d. Explain how the comparison of the results of the two costing methods could impact the decisions made by Casito's management group.

Reference no: EM131128607

Questions Cloud

Examine your own culture from an etic perspective : In the Final Research Paper, you will examine your own culture from an etic perspective and another culture from an emic perspective to demonstrate your understanding of cultural relativism and examine misconceptions and ethnocentric beliefs conc..
Ideas about freedom and social justice : This week’s Critical Thinking assignment is based on the articles by Barbour and Dyson. Begin your paper by briefly describing Barbour and Dyson’s ideas about freedom and social justice, particularly as they relate to technology. Then choose a techno..
What is the catalytic efficiency of carbonic anhydrase : what is the catalytic efficiency of carbonic anhydrase? if he Vmax was determined to be 2.0x10^5 micro moles/sec in an experiment where Et=0.2 micro moles enzyme.
Create names for each cluster and describe their properties : The data file contains data on 325 metropolitan cities in the United States. Please use hierarchical cluster analysis in R to find appropriate number of clusters. Create names for each cluster and describe their properties
Manufactures multiple types of products : (ABC; decision making) Casito Corp. manufactures multiple types of products; however, most of the company's sales are from Product #347 and Product #658. Product #347 has been a standard in the industry for several years;
What is the velocity of an enzyme catalyzed reaction : What is the velocity of an enzyme catalyzed reaction for a substrate [s] of 0.3 mM- if the Km is 2.5mM - the Vmax is 20.6 micro moles/min?
Shipments received and the cost of receiving reports : Wyoming Wholesale has gathered the following data on the number of shipments received and the cost of receiving reports for the first seven weeks of 2010.
Develop system for evaluating the productivity : As the administrative manager in a law office, you have been asked to develop a system for evaluating the productivity of the 15 lawyers in the office. What difficulties are you going to have in doing this, and how are you going to overcome them?
Financial statements information for both carlisle : Problem 1 On January 1, 2011, Carlisle, Inc. acquired 100% of Tid-Bit, Inc. At the time of the acquisition, land and equipment were undervalued by $57,300 and $78,000, respectively.

Reviews

Write a Review

 

Accounting Basics Questions & Answers

  Heathrow issues 1700000 of 8 15-year bonds dated january 1

heathrow issues 1700000 of 8 15-year bonds dated january 1 2011 that pay interest semiannually on june 30 and december

  Record the acquisition of the land and the building

The building was completed on November 2, 2013, at a cost of $6,000,000. Xilon paid $4,000,000 in cash and the remainder was paid by the city of Monrovia.

  For an incremental order of 5000 units at 70 each the

for an incremental order of 5000 units at 70 each the following costs have been compiled incremental variable costs 50

  Name three 3 non-value activities you have experienced in

overhead activity health insurance premiums. your firm picks up 80 of health insurance for itacirceurotms employees.

  How evidence is the heart of the audit

How evidence is the heart of the audit.

  Federal semiconductors issued 11 bonds dated january 1 with

federal semiconductors issued 11 bonds dated january 1 with a face amount of 880 million on january 1 2013. the bonds

  Using the high-low method calculate the stores total fixed

sporting goods is a locally owned store that specializes in printing team jerseys. the majority of its business comes

  Estimating bad debt expense

Gilkey Security Systems has the following for the year ended 12-31-09 before adjustments. Gilkey uses the aging method of estimating bad debt expense. The journal entry for estimating bad debt expense at year end is:

  Problem regarding the certainty equivalents

The certainty equivalent concept can be widely employed in the analysis of personal and business decision making. Indicate whether each of the following statements is true or false and explain why:

  Net of depreciation-consolidated balance sheet

At what amount should the equipment (net of depreciation) be included on the consolidated balance sheet dated December 31, 2009?

  Funded with a million dollars at his death

Bob had a will drafted which formed a trust for his wife that would be funded with a million dollars at his death. The trust is required to give her all income annually and allows her to designate who among their children will receive the trust pr..

  Differentiate between a compliance audit and an operational

Differentiate between a compliance audit and an operational audit.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd