Value$-$Stream Average Costing, ABC, DBC

A value stream has three activities and two products. The units produced and shipped per week are $50$ of the limited model $($Model K$),$ characterized by special additional features, and $150$ of the regular model $($Model R$),$ with only basic features. The conversion cost resource consumption patterns are shown as follows:

Line Item Description

Model K

Model R

Costs of Value

$-$Stream Activities

Cell manufacturing

$2,700$ minutes

$2,100$ minutes

$$19,200$

Engineering

$65$ hours

$15$ hours

$3,400$

Testing

$25$ hours

$55$ hours

$3,000$

$$ Total

$$

$$

$$25,600$

Required:

$1.$ Calculate the ABC product cost $($conversion cost$)$ for Models K and R$.$ Round dollars to $2$ decimal places.

Model K$$

Model R$$

$2.$ Calculate the value$-$stream average product cost $($conversion cost$).$ Assuming reasonable stability in the consumption patterns of the products and product mix, assess how well the products are grouped, based on similarity.

The average cost is markedly$$

different fromsimilar todifferent from the ABC costs, which suggests$$

fill in the blank $2$ of $4$

$3.$ Calculate the cycle time for each product by dividing the total hours used for each product by the units produced of each product. Now calculate the DBC cost for each product. Round the answers to nearest cent.

Model K$$

Model R