Nasir Manufacturing produces two products in its Sharjah plant: Crystal and Glass. Since inception, Nasir has...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Nasir Manufacturing produces two products in its Sharjah plant: Crystal and Glass. Since inception, Nasir has used only one manufacturing overhead pool to accumulate costs. Manufacturing overhead has been allocated to products based on direct labor hours. Until recently, Nasir was the sole producer of Glass and was able to dictate the selling price. However, last year Zayed Products began marketing a comparable product at a price below the standards costs developed by Nasir. Market share has declined rapidly, and Nasir must decide whether to meet the competitive price or to discontinue the product line. Recognizing that discontinuing the product line would place additional burden on its remaining product, Crystal. Nasir is planning to use the activity-based costing (ABC) to determine if it would show a different cost structure for the two products. The three major indirect costs for manufacturing the products are purchase orders, power usage and setup costs and handling materials. A decision was made to separate the manufacturing department costs into three activity centers: 1) Inspection using number of purchase orders as the cost driver, 2) Fabricating using machine hours as the cost driver and 3) Assembly using number of setups as the cost driver. The annual budget before separation of manufacturing overhead is shown below in the table: Total Cost Product line Crystal Number of units Direct labor Number of direct labor hours Total Direct Labor Direct Material Manufacturing Overhead 210,000 hours AED 840,000 AED 630,000 30,000 2 hours/unit AED 4/unit Class 50,000 3 hours/unit AED 5/unit The cost structure after separation of overhead into activity pools is shown below: Inspection Fabricating Assembly 30% 25% Manufacturing overhead 20% Direct Labor Direct Material The activity base rates for the products are shown below: Activity Base Crystal Number of Purchase Orders 2,000 3 4,000 Machine hours per unit Number of setups 30% 35% 30% 2- Fabricating department (1 mark) 3- Assembly department (1 mark) Glass 3,000 5.76 6,000 Questions: A. By allocating the manufacturing overhead based on direct labor hours, calculate the: 1- Total manufacturing budgeted cost of the manufacturing department (2 marks) 2- Cost per unit for Crystal product (3 marks) 3- Cost per unit for Class product (3 marks) 40% 40% 50% B. After separation of manufacturing overhead into activity pools, compute the total manufacturing budgeted cost of the: 1- Inspection department (1 mark) C. Using ABC system, calculate the cost per unit for. 1- Crystal (2.5 marks) 2- Glass (2.5 marks) D. Discuss how a decision by Nasir Manufacturing regarding the continued production of Crystal will be affected by the results of your calculations in requirement C. (2 marks) E. If Nasir decides to moves to mass production and focuses on one product (Glass) by using process costing system in highly automated process. Identify the five steps required of the production the cost report if Nasir uses weighted average method. (2 marks) Nasir Manufacturing produces two products in its Sharjah plant: Crystal and Glass. Since inception, Nasir has used only one manufacturing overhead pool to accumulate costs. Manufacturing overhead has been allocated to products based on direct labor hours. Until recently, Nasir was the sole producer of Glass and was able to dictate the selling price. However, last year Zayed Products began marketing a comparable product at a price below the standards costs developed by Nasir. Market share has declined rapidly, and Nasir must decide whether to meet the competitive price or to discontinue the product line. Recognizing that discontinuing the product line would place additional burden on its remaining product, Crystal. Nasir is planning to use the activity-based costing (ABC) to determine if it would show a different cost structure for the two products. The three major indirect costs for manufacturing the products are purchase orders, power usage and setup costs and handling materials. A decision was made to separate the manufacturing department costs into three activity centers: 1) Inspection using number of purchase orders as the cost driver, 2) Fabricating using machine hours as the cost driver and 3) Assembly using number of setups as the cost driver. The annual budget before separation of manufacturing overhead is shown below in the table: Total Cost Product line Crystal Number of units Direct labor Number of direct labor hours Total Direct Labor Direct Material Manufacturing Overhead 210,000 hours AED 840,000 AED 630,000 30,000 2 hours/unit AED 4/unit Class 50,000 3 hours/unit AED 5/unit The cost structure after separation of overhead into activity pools is shown below: Inspection Fabricating Assembly 30% 25% Manufacturing overhead 20% Direct Labor Direct Material The activity base rates for the products are shown below: Activity Base Crystal Number of Purchase Orders 2,000 3 4,000 Machine hours per unit Number of setups 30% 35% 30% 2- Fabricating department (1 mark) 3- Assembly department (1 mark) Glass 3,000 5.76 6,000 Questions: A. By allocating the manufacturing overhead based on direct labor hours, calculate the: 1- Total manufacturing budgeted cost of the manufacturing department (2 marks) 2- Cost per unit for Crystal product (3 marks) 3- Cost per unit for Class product (3 marks) 40% 40% 50% B. After separation of manufacturing overhead into activity pools, compute the total manufacturing budgeted cost of the: 1- Inspection department (1 mark) C. Using ABC system, calculate the cost per unit for. 1- Crystal (2.5 marks) 2- Glass (2.5 marks) D. Discuss how a decision by Nasir Manufacturing regarding the continued production of Crystal will be affected by the results of your calculations in requirement C. (2 marks) E. If Nasir decides to moves to mass production and focuses on one product (Glass) by using process costing system in highly automated process. Identify the five steps required of the production the cost report if Nasir uses weighted average method. (2 marks)
Expert Answer:
Related Book For
International Financial Management
ISBN: 978-0132162760
2nd edition
Authors: Geert Bekaert, Robert J. Hodrick
Posted Date:
Students also viewed these accounting questions
-
Suppose that you buy a1,000,000 call option against dollars with a strike price of $1.2750/. Describe this option as the right to sell a specific amount of dollars for euros at a particular exchange...
-
Suppose that you buy an interest rate cap on three month LIBOR with a two year maturity and simultaneously sell a floor on three month LIBOR with a two year maturity. Ignore the premiums. Draw a...
-
Suppose that you buy a 1 -year maturity bond with a coupon of 7% paid annually. If you buy the bond at its face value, what real rate of return will you earn if the inflation rate is a. 4%? b. 6%? c....
-
Local 54 has retained James Love to represent it in a grievance against Dilated Peoples Optical Inc. The union is grieving the employers decision to exclude from the bargaining unit the position of...
-
Name three of the four activities within the scope of production planning?
-
A bank sells a "three against six" $3,000,000 FRA for a three-month period beginning three months from today and ending six months from today. The purpose of the FRA is to cover the interest rate...
-
Thomas Rusnack and his then-wife, Analisa Rusnack, opened a home equity line of credit (HELOC) with Cardinal Bank in August 2003. Between 2003 and 2006, the Rusnacks periodically drew on the HELOC...
-
A manufacturer of prefabricated homes has decided to subcontract four components of the homes. Several companies are interested in receiving this business, but none can handle more than one...
-
Assume that Twigs has hired you as a database consultant to develop it's operational database having the three tables described at the end of Chapter 6. Assume that Twigs personnel are the owner, an...
-
Felde Bucket Co., a manufacturer of rain barrels, had the following data for 2016: Sales .......................... 2,500 units Sales price ................... $40 per unit Variable costs...
-
Luke Corp calculates its product margins including a share of corporate costs. One product, Bubbs, currently sells for $8.50 per case. In the most recent year 2.33 million cases were sold Under the...
-
list 6 examples of forms that are used in a manual control system . list 6 examples of stock items in the the industry . list 4 methods you can use to identify slow moving stock items.
-
"Financial Intelligence" gave examples of firms that had: 1) profit (positive net income) without cash (negative cash flow from operations) and 2) cash (positive cash flow from operations) without...
-
Can credit cards be issued to consumers who have been irresponsible with credit?
-
What are the three primary controls used in protecting corporate assets?
-
For the past several years, an audit client has bought company vehicles and depreciated them over a 10-year period. In the current year, the company determined that a more realistic estimated life...
-
The Juicy Trust received $150,000 of interest income. The trustee took a $15,000 fee for her services. The trustee also paid $5,000 of trust income to a life insurance company to pay the annual...
-
The diagram shows the two forces acting on a small object. Which of the following is the resultant force on the object? A. 8 N downwards B. 8 N upwards C. 2 N downwards D. 2 N upwards 3 N 5 N
-
Intel is scheduled to receive a payment of 100,000,000 in 90 days from Sony in connection with a shipment of computer chips that Sony is purchasing from Intel. Suppose that the current exchange rate...
-
Suppose Viacom can issue $100,000,000 of debt at an AIC of 9.42%, whereas Gaz de France can issue $100,000,000 of debt at an AIC of 10.11%. Suppose that the exchange rate is $1.35/. If Viacom issues...
-
What is likely to happen if a central bank suddenly prints a large amount of new money?
-
Rank in order, from largest to smallest, the size of the friction forces in the five different situations (one or more friction forces could be zero). The box and the floor are made of the same...
-
The terminal speed of a Styrofoam ball is 15 m/s. Suppose a Styrofoam ball is shot straight down with an initial speed of 30 m/s. Which velocity graph is correct? Vy (m/s) Vy (m/s) v, (m/s) vy (m/s)...
-
Boxes P and Q are sliding to the right across a frictionless table. The hand His slowing them down. The mass of P is larger than the mass of Q. Rank in order, from largest to smallest, the horizontal...
Study smarter with the SolutionInn App