Weighted Average Method, Physical Flow, Equivalent Units, Unit Costs, Cost Assignment, ABC

Swasey Fabrication, Inc., manufactures frames for bicycles. Each frame passes through three processes: Cutting, Welding, and Painting. In September, the Cutting Department of the Tulsa, Oklahoma, plant reported the following data:

1. In Cutting, all direct materials are added at the beginning of the process.
2. Beginning work in process consisted of 41,500 units, 20 percent complete with respect to direct labor and overhead. Costs in beginning inventory included direct materials, $1,205,000; direct labor, $222,800; and applied overhead, $150,000.
3. Costs added to production during the month were direct materials, $2,698,400; direct labor, $3,454,700. Overhead was assigned using the following information:

   Activity		Rate		Actual Driver Usage
   Inspection		$150 per inspection hour		4,000 inspection hours
   Maintenance		$750 per maintenance hour		1,600 maintenance hours
   Receiving		$300 per receiving order		2,000 receiving orders

4. At the end of the month, 121,200 units were transferred out to Welding, leaving 13,400 units in ending work in process, or 25 percent complete.

Required:

1. Prepare a physical flow schedule.

Swasey Fabrication, Inc. Physical Flow Schedule

Units to account for:
Units, beginning work in processUnits completed and transferred outUnits, ending work in processUnits, beginning work in process	Units, beginning work in process
Units completed and transferred outUnits, ending work in processUnits started (transferred in)Units started (transferred in)	Units started (transferred in)
Total units to account for	fill in the blank bf496ffb300404e_5
Units accounted for:
Units, beginning work in processUnits completed and transferred outUnits started (transferred in)Units completed and transferred out	Units completed and transferred out
Units, beginning work in processUnits, ending work in processUnits started (transferred in)Units, ending work in process	Units, ending work in process
Total units accounted for	fill in the blank bf496ffb300404e_10

Feedback

1. The physical flow schedule traces the units in process regardless of their stage of completion and provides the information needed for preparing the equivalent units schedule.

2. Calculate equivalent units of production for direct materials and conversion costs.

	Equivalent Units
Direct Materials	fill in the blank 203ded09305fff3_1
Conversion Costs	fill in the blank 203ded09305fff3_2

3. Compute unit cost under weighted average.

Unit direct materials cost	$fill in the blank 203ded09305fff3_3
Unit conversion costs	fill in the blank 203ded09305fff3_4
Total unit cost	$fill in the blank 203ded09305fff3_5

DBC, TDABC, and ABC

The Bienestar Cardiology Clinic has two major activities: diagnostic and treatment. The two activities use four resources: nursing, medical technicians, cardiologists, and equipment. Detailed interviews have provided the following work distribution matrix shown below.

	Resources
Activity	Nursing	Technicians	Cardiologists	Equipment	Total Activity Time
Diagnosing patients	0.70	0.80	0.40	0.60	12,000	hrs.
Treating patients	0.30	0.20	0.60	0.40	8,000	hrs.
Total time (hrs.)	4,000	4,000	6,000	6,000	20,000
Cost	$80,000	$80,000	$320,000	$320,000

The total time estimated corresponds to practical capacity (interviewers adjusted the total time to about 80 percent of the available time). The equipment time is measured in machine hours. Thus, the total time (at practical capacity) in the system is 20,000 hours. In considering the implementation of a TDABC model, the following unit times and transaction information are also provided:

	Unit Time			Driver	Expected Activity Driver Quantity
Diagnosing patients	3	hrs		No. of patients	4,000
Treating patients	0.8	hr.		No. of treatments	10,000

The clinic has identified three types of patients: those with no heart disease, those with mild heart disease, and those with severe heart disease. The following additional data are provided:

Patient Type	Diagnosing Patients	Treating Patients	Average Time Spent Servicing Each Patient Type (Cycle Time)
No disease	2,000	0	3 hrs.
Mild disease	1,500	5,000	5.6 hrs.
Severe disease	500	5,000	11.0 hrs.
Activity cost	?	?

Required:

1. Calculate the activity costs for diagnosing and treating patients. Using the activity costs calculated, calculate the unit cost of servicing each type of patient using traditional ABC.

	Activity rates
Diagnosing	$fill in the blank 1
Treating	$fill in the blank 2

Calculate the unit cost of servicing each type of patient using traditional ABC.

	Unit Cost
No Disease	$fill in the blank 3
Mild	$fill in the blank 4
Severe	$fill in the blank 5

2. Using TDABC-derived activity rates, calculate the unit cost of servicing each type of patient. If required round your answer to two decimal places.

	Activity rates
Diagnosing	$fill in the blank 6
Treating	$fill in the blank 7

	Unit Cost
No Disease	$fill in the blank 8
Mild	$fill in the blank 9
Severe	$fill in the blank 10

3. Using DBC, calculate the unit cost of servicing each type of patient. If required round your answer to two decimal places.

	Unit Cost
No Disease	$fill in the blank 11 per patient
Mild	$fill in the blank 12 per patient
Severe	$fill in the blank 13 per patient

4. Suppose that a medical consultant proposes a new patient-processing system that will shorten diagnostic and treatment times but would require more skilled nurses and technicians as well as an equipment upgrade. However, the total practical capacity would remain the same, at 20,000 hours. Total resource costs are predicted to increase by $100,000. The consultant estimates that the cycle times for each patient type would be reduced from 3 to 2 hours, 5.6 to 4.5 hours, and 11 to 9 hours. The physicians that own the clinic have expressed a willingness to implement the changes, provided that the unit cost of servicing each patient type decreases. Use DBC to estimate the new unit costs. If required round your answer to two decimal places.

	Unit Cost
No Disease	$fill in the blank 14 per patient
Mild	$fill in the blank 15 per patient
Severe	$fill in the blank 16 per patient

Should the clinic implement the new system?

YesNoYes

Direct Method, Reciprocal Method, Overhead Rates

Macalister Corporation is developing departmental overhead rates based on direct labor hours for its two production departmentsMolding and Assembly. The Molding Department employs 24 people, and the Assembly Department employs 78 people. Each person in these two departments works 2,200 hours per year. The production-related overhead costs for the Molding Department are budgeted at $155,000, and the Assembly Department costs are budgeted at $70,000. Two support departmentsEngineering and General Factorydirectly support the two production departments and have budgeted costs of $240,000 and $359,000, respectively. The production departments' overhead rates cannot be determined until the support departments' costs are properly allocated. The following schedule reflects the use of the Engineering Department's and General Factory Department's output by the various departments.

	Engineering	General Factory	Molding	Assembly
Engineering hours		2,000	2,300	7,700
Square feet	136,080		434,160	77,760

For all requirements, round allocation ratios to four significant digits and round allocated costs to the nearest dollar.

Required:

1. Calculate the overhead rates per direct labor hour for the Molding Department and the Assembly Department using the direct allocation method to charge the production departments for support department costs. Round final answers to the nearest cent.

	Overhead rate per DLH
Molding	$fill in the blank 1
Assembly	$fill in the blank 2

2. Calculate the overhead rates per direct labor hour for the Molding Department and the Assembly Department using the reciprocal method to charge support department costs to each other and to the production departments. Round final answers to the nearest cent. Round your intermediate calculations to four decimal places.

	Overhead rate per DLH
Molding	$fill in the blank 3
Assembly	$fill in the blank 4