Brunswick Parts is a small manufacturing firm located in eastern Canada. The company, founded in produces metal parts for many of the larger manufacturing firms located in both Canada and the United States. It prides itself on high quality and customer service, and many of its customers have been buying at least some of their parts from Brunswick since the s

Production of the parts takes place in one of two plants. The older plant, located in Fredericton, was purchased when the company was founded, and the last major improvements to the plant took place in the s A newer plant, located in Moncton, was built in to take advantage of the expanding markets. The same part can be produced in either plant, and the final scheduling decision is based on capacity, transportation costs, and production costs.

At a weekly production meeting, Sara Hunter, the manufacturing manager, expresses her frustration at trying to schedule production.

Something isnt right. We build a new plant to take advantage of new manufacturing technology and we struggle to keep it filled. We didnt have this problem a few years ago when we couldnt keep up with demand, but with the current economy, marketing keeps sending orders to the old plant in Fredericton. I know manufacturing, but I guess I must not understand accounting.

The latest order that generated discussion among plant management was placed by Lawrence Machine Tool Company, a longtime customer. The order called for units of a special rod P used in one of its many products. The order was received by the marketing department. Following the established procedure at Brunswick, the marketing manager checked the product costs for both plants. Because quality and transportation costs would be the same from either plant, a decision was made to produce and ship from the Fredericton plant.

The cost system at Brunswick is a traditional manufacturing cost system. Plant overhead including plant depreciation is allocated to products based on estimated production for the period. Separate overhead rates are computed for each plant. Corporate administration costs are allocated to the plants based on the estimated production in the plant for purposes of executive performance measurement. Production is measured by direct laborhours. Cost and production information for P follows.

Per unit of P Moncton Fredericton

Direct material kilogram @ $ $ $

Direct laborhours hours hours

Direct labor wage rate $ $

Corporate and plant overhead budgets are as follows:

Corporate Administration Moncton Fredericton

Corporate

Marketing $

R&D

Depreciation

General administration

Plant overhead before corporate allocations:

Supervision $ $

Indirect labor

Depreciation

Miscellaneous

Total $ $ $

Estimated production direct laborhours:

Required:

What would be the reported product cost of P per unit for the two plants?

At what plant should the P units for the Lawrence order be produced?

Answer rating: 100% (QA)

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