The Gifford Manufacturing Company has two producing departments, machining and assembly. Mr. Gifford recently automated the...

 

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The Gifford Manufacturing Company has two producing departments, machining and assembly. Mr. Gifford recently automated the machining department. The installation of a CAM system, together with robotic workstations, drastically reduced the amount of direct labor required. Meanwhile, the assembly department remained labor intensive. The company had always used one firm-wide rate based on direct-labor hours as the cost-allocation base for applying all costs (except direct materials) to the final products. Mr. Gifford was considering two alternatives: (1) continuo using direct-labor hours as the only cost-allocation base, but use different rates in machining and assembly, and (2) using machine hours as the cost-allocation base in the machining department while conlinuing with direcd-labor hours in assemily. Budgeled data for 20Xx0 are as follows: E (Click the icon lo view the data.) Read the requirements. Requirement 1. Suppose Gifford continued to use one firm-wide rate based on direct-labor hours to apply all manufacturing costs (except direct materials) to the final products. Compute the cost-application rate that would be used. First enter Ihe formula then compute the cosl-applicalion rate. (Round Ihe firmwide raale dollar amoint to the nearest cenl. Abreviations used: DL hour = Direct Labor hour. Mach. hour = Machine hour.) Firmwide Rate - X Requirements Data table 1. Suppose Gifford continued to use one firm-wide rate based on direct-labor hours to apply all manufacturing costs (except direct materials) to the final products. Compute the cost-application rate that would be used. Machining Assembly Total 2. Suppose Gifford continued to use direct-labor hours as the only cost-allocation base but used different rates in machining and assembly. Total cost (except direct materials) 576,000 $ 480,000 S 1,056,000. Machine hours 96,000 96,000 a. Compute the cost-application rate for machining. Direct-labor hours 12,000 48,000 60,000 b. Compute the cost-applicalion rate for assembly. 3. * Not applicable Suppose Gifford changed the cost accounting system to use machine hours as the cost-allocation base in machining and direct-labor hours in assembly. a. Compute the cost-application rate for machining. b. Compute the cost-application rate for assermbly. 4. Three products use the following machine hours and direct-labor hours: Print Done Machine Direct-Labor Direct-Labor Hours in Hours in Hours in Machining Machining Assembly Product A 7.0 2.0 13.0 Product B 12.0 2.7 2.5 Product C 13.0 2.2 8.2 a. Compute the manufacturing cost of sach product (excluding direct materials) using one firm-wide rate based on direct-labor hours. b. Compute the manutacturing cost of each product (excluding direct materials) using direct-labor hours as the cost-ellocation base, but with different cost-allocation rates in mechining and assembly. c. Compute the manufacturing cost of cach product (excdluding direct materials) using a cost-allocation rate based on direcl-labor hours in assermbly and machine hours in machining. d. Compare and explain the results in requirements 4a, 4b, and 4c. Print Done The Gifford Manufacturing Company has two producing departments, machining and assembly. Mr. Gifford recently automated the machining department. The installation of a CAM system, together with robotic workstations, drastically reduced the amount of direct labor required. Meanwhile, the assembly department remained labor intensive. The company had always used one firm-wide rate based on direct-labor hours as the cost-allocation base for applying all costs (except direct materials) to the final products. Mr. Gifford was considering two alternatives: (1) continuo using direct-labor hours as the only cost-allocation base, but use different rates in machining and assembly, and (2) using machine hours as the cost-allocation base in the machining department while conlinuing with direcd-labor hours in assemily. Budgeled data for 20Xx0 are as follows: E (Click the icon lo view the data.) Read the requirements. Requirement 1. Suppose Gifford continued to use one firm-wide rate based on direct-labor hours to apply all manufacturing costs (except direct materials) to the final products. Compute the cost-application rate that would be used. First enter Ihe formula then compute the cosl-applicalion rate. (Round Ihe firmwide raale dollar amoint to the nearest cenl. Abreviations used: DL hour = Direct Labor hour. Mach. hour = Machine hour.) Firmwide Rate - X Requirements Data table 1. Suppose Gifford continued to use one firm-wide rate based on direct-labor hours to apply all manufacturing costs (except direct materials) to the final products. Compute the cost-application rate that would be used. Machining Assembly Total 2. Suppose Gifford continued to use direct-labor hours as the only cost-allocation base but used different rates in machining and assembly. Total cost (except direct materials) 576,000 $ 480,000 S 1,056,000. Machine hours 96,000 96,000 a. Compute the cost-application rate for machining. Direct-labor hours 12,000 48,000 60,000 b. Compute the cost-applicalion rate for assembly. 3. * Not applicable Suppose Gifford changed the cost accounting system to use machine hours as the cost-allocation base in machining and direct-labor hours in assembly. a. Compute the cost-application rate for machining. b. Compute the cost-application rate for assermbly. 4. Three products use the following machine hours and direct-labor hours: Print Done Machine Direct-Labor Direct-Labor Hours in Hours in Hours in Machining Machining Assembly Product A 7.0 2.0 13.0 Product B 12.0 2.7 2.5 Product C 13.0 2.2 8.2 a. Compute the manufacturing cost of sach product (excluding direct materials) using one firm-wide rate based on direct-labor hours. b. Compute the manutacturing cost of each product (excluding direct materials) using direct-labor hours as the cost-ellocation base, but with different cost-allocation rates in mechining and assembly. c. Compute the manufacturing cost of cach product (excdluding direct materials) using a cost-allocation rate based on direcl-labor hours in assermbly and machine hours in machining. d. Compare and explain the results in requirements 4a, 4b, and 4c. Print Done

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