Cycle Time and Conversion Cost per Unit

Hatch Manufacturing produces multiple machine parts. The theoretical cycle time for one of its products is 60 minutes per unit. The budgeted conversion costs for the manufacturing cell dedicated to the product are $1,080,000 per year. The total labor minutes available are 120,000. During the year, the cell was able to produce 1.2 units of the product per hour. Suppose also that production incentives exist to minimize unit product costs.

Required:

1. Compute the theoretical conversion cost per unit. $fill in the blank 1 per unit

2. Compute the applied conversion cost per unit (the amount of conversion cost actually assigned to the product). $fill in the blank 2 per unit

3. Briefly explain how Hatch Manufacturing might further benefit from its accountants utilizing prescriptive data analytics (see Exhibit 2.6 for a review of data analytic types).

The accountants appear to have utilized

diagnosticdiscriptivepredictiveprescriptive

data analytics to understand the drivers of costs as well as

diagnosticdiscriptivepredictiveprescriptive

analytics to forecast that if current cycle time could be reduced from 50 minutes per unit to 37 minutes per unit, then conversion costs would be reduced from $450 per unit to $333 per unit.

A logical next step would be for the accountants to utilize

diagnosticdiscriptivepredectiveprescriptive

data analytics to identify specific process reengineering actions.