the intrepid and explorer. | Business & Finance homework help

Problem 3

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Braithwaite Company manufactures two types of kayaks, the Intrepid and Explorer. Previously, the company has allocated manufacturing support costs using a plant-wide rate based on direct labour hours. It has been suggested that the company consider assigning support costs to the equipment using activity-based costing. The following data has been collected:

Item

Intrepid

Explorer

Units produced and sold

50,000

20,000

Direct labour hours used

25,000

20,000

Direct labour cost

$75,000

$60,000

Number of times each unit is handled

3

5

Number of cuts per unit

2

6

Number of design changes (total)

5

10

Number of product setups (total)

30

40

The actual manufacturing support costs incurred were as follows:


Cost Pool

Related Costs

Handling

$   500,000

Cutting

1,500,000

Design changes

600,000

Setups

20,000

Total

$2,620,000

The direct material cost for the Intrepid model is $500 per unit, and for the Explorer model, $700 per unit.

Required:

1.       Determine the unit cost of each product using direct labour hours to allocate all manufacturing support costs.

2.       Determine the unit cost of each product using activity-based costing.

3.       Explain why the unit cost is different in requirements 1 and 2. 

 

 

 

 

 

 

Problem 6 (12 marks)

Whyte Trucks Inc. produces large, heavy duty trucks. It is attempting to reduce manufacturing costs. It polled customers with respect to product requirements and obtained the following information:

Category

Importance

Driver comfort

30

Fuel efficiency

50

Safety

20

Whyte identified the following target costs for various truck components:

Function

group

Target cost

Frame

$30,000

Engine

50,000

Body

40,000

Other

80,000

Whyte engineers produced the following quality function deployment matrix:

 

 

 

 

 

Function group

Categories

 

Frame

Engine

Body

Other

Driver comfort

 

.2

 

.2

.6

Fuel efficiency

 

 

.6

.3

.1

Safety

 

.3

.1

.2

.4

Required: Determine which function groups are candidates for cost reduction.