7.

29
1 Total
Cutting
assemble
inspection
rework

Cowboy
6,000.00
3,750.00
2,250.00
300.00

Cogirl
0.35
0.40
0.30
0.25

0.65
0.60
0.70
0.75

2 Yes, becouse products consume overhead activities in different proportions

7.31
classic
Overhead cost
processing
Preparing statm
Answering questions
Providing ATM
total cost
# crdholders
Unit cost

gold
8,000.00

1,200.00
7,200.00
48,000.00
38,400.00
94,800.00
5,000.00
18.96

720.00
4,320.00
72,000.00
11,520.00
88,560.00
20,000.00
4.43

275,000.00
275,000.00
275,000.00

0.20
0.55
0.25

55,000.00
151,250.00
68,750.00

808,000.00
1,212.00
400,000.00
300.00
Large
small
Order filling
8,000.00
800,004.00
Sales force
8,000.00
391,999.00
16,000.00 1,192,003.00
Smaller retail cost more than large

666.67
1,333.33

7.32
Comparing
Resolving
Processing
7.33
Order placed
# calls

7.34
Activity rates
tasting
reodering

Purchasing cost
tasting
reodering
Total

1,500,000.00
2,500.00
375,000.00
125.00
Alpha Electr
125X
30Y
1,500,000.00 1,950,000.00
900,000.00
585,000.00
225,000.00
150,000.00
2,625,000.00 2,685,000.00
150,000.00
75,000.00
17.50
35.80

600.00
3,000.00
La Paz Co
125X
225,000.00
7,800.00
-

232,800.00
18,750.00
12.42

7.35 Retesting reworked products is non-value aadded, it means that the product doent function right and needed
The nonvalue added cost of retesting is $480,000. The cost of competitor has no influence in the analysis. Roo
Welding is value added. However the activity is not performed efficintly, according to benchmarking study
45000
36000
20
Non value added cost

180000

7.42

#1 Uses Functional or Volume Based costing

1.
Sales (in units)

750 x 700 & 7,500 x 70

Sales
525,000 units x $150
Allocation of Total Customer Costs$5,250,000 x .5

#2 Uses Activity Based Costing (ABC)

2. Activity Rates:
Ordering rate =
Selling rate =
Service rate =

$3,080,000/770 sales
= orders
$1,120,000/140 sales
= calls
$1,050,000/525 service
=
calls

Ordering costs:
$4,000 x
$4,000 x

700
70

Selling rate:
$8,000 x
$8,000 x

70
70

Service rate:
$2,000 x
$2,000 x
Total

350
175

$3 price decrease:
Non-JIT costs total $1,190,000 which per order using th 70 orders is $1,190,000/70 =
These costs do not change if the price is lowered by $3. Manufacturing costs also do not
Profitability will decrease due to lower price but not by the cost which does not change

3. It sounds like the JIT buyers are switching their inventory carrying costs to Stillwater Designs without any
significant benefit to Stillwater Designs. Stillwater Designs needs to increase prices to reflect the additional
demands on customer-support activities. Furthermore, additional price increases may be needed to reflect the

increased number of setups, purchases, and so on that are likely occuring inside the plant. Stillwater
Designs should also immediately initiate discussions with its JIT customers to begin negotiations for achieving s
of the benefits that a JIT supplier should have, such as long-term contracts. The benefits of long-term
contracting may offset most or all of the increased costs from the additional demands made on other activities

9.22 Production Budget (In Units)

For the Coming Quarter

Sales
Desired ending inventory
Total needs
Less:
Beg inventory
Units to be produced

Jan
41,000
9,500
50,500

Feb
38,000
12,500
50,500

Mar
50,000
12,750
62,750

6,700
43,800

9,500
41,000

12,500
50,250

Beginning inventory for January = Ending inventory for December

9.23
Preparing a Direct Materials Purchases Budget
1 Ending inventory=for December

0.15 x

Ending inventory=for January

0.15 x

Ending inventory=for February

0.15 x

Beginning inventory for January = Ending inventory for December

2. Direct materials purchases buget - Chemicals in Gallons:

Jan
Production in units
x Gallong per unit
Gallons for production
Desired Ending Inventory
Needed
Less: Beginning inventory
Purchases
x Price per gallon
Dollar purchases

3 Ending inventory for December

43,800
5.5
240,900
33,825
274,725
36,135
238,590
2.00
477,180

0.15 x

Ending inventory for January

0.15 x

Ending inventory for February

0.15 x

4 Direct materials purchases budget - Drums:

Jan
Production in units
43,800
x Drums per unit
1
Drums for production
43,800
Desired ending inventlry
6,150
Needed
49,950
Less: Beginning inventory
6,570
Purchases
43,380
x Price per drum
1.60
Dollar purchases
$
69,408
9.24 Direct Labor Budget
Jan
Units to be produced
43,800
x direct labor hrs per unit
0.3
Tot Dir Labor Hours
13,140
x Wage rate
$
18 $
Direct Labor Cost
$
236,520 $
9.25

Feb
41,000
0.3
12,300
18 $
221,400 $

Mar
Total
50,250
135,050
0.3
0.3
15,075
40,515
18 $
18
271,350 $ 729,270

January
February
March
Budg direct LH
13,140.00
12,300.00
15,075.00
Var rate
0.70
0.70
0.70
Budg variable overhead
9,198.00
8,610.00
10,552.50
Budjet fixes overhead
2,750.00
2,750.00
2,750.00
Total overhead
11,948.00
11,360.00
13,302.50

9.3
May
June
July
August
September
Total
9.34
1st 2012
2nd
3rd

May
June
July
16,800.00
42,000.00
20,160.00

Aug
2,100.00
50,400.00
15,400.00

25,200.00
38,500.00
17,360.00
81,060.00

S12L7
S12L5
Total
380,000.00
390,000.00
770,000.00
1,045,000.00
420,000.00
1,465,000.00
2,660,000.00 1,590,000.00
4,250,000.00

4th
2,185,000.00 1,170,000.00
3,355,000.00
1th 2013
427,500.00
360,000.00
787,500.00
A production budget is the biggest in the 3rd and 4th quoters
9.37

April
May
June
Total quoter
Sales in utits
200,000.00
240,000.00
220,000.00
Desired ending inv
72,000.00
66,000.00
78,000.00
Total needs
272,000.00
306,000.00
298,000.00
Less: Beg inv
40,000.00
72,000.00
66,000.00
Units to be produced
232,000.00
234,000.00
232,000.00 698,000.00

9.32
157,000.00
116,000.00

0.85
0.25

18,375.00
29,000.00

151,825.00

Cash Budget
Beg cash balance
2,147.00
cash sales
total cash available
less
payment for:
raw materials
29,000.00
direct labor
35,570.00
Overhead
11,250.00
Selling and adm exp
Income tax
Equipment
Total disbursment
Excess(deficiency) of cash available
Financing:
Borrowings
Repayments
Interest
Total Financing
Ending cash balance

116,000.00
7,300.00
5,950.00

0.25
0.90
4,100.00

0.15

30Y
525,000.00
7,200.00
532,200.00
18,750.00
28.38

26.00
75,000.00

12.00
18,750.00

28.00
18,750.00

t doent function right and needed to be retested.

as no influence in the analysis. Root couse for retesting could be poor quolity of the product.

ording to benchmarking study

720000

36000

JIT
525,000

Non-JIT
525,000

$ 78,750,000
$ 2,625,000

$ 78,750,000
$ 2,625,000

$4,000 per sales order

$8,000 per sales call
$2,000 per sevice call

JIT
$2,800,000

Non-JIT
$280,000

$560,000
$560,000

$700,000
$4,060,000

h 70 orders is $1,190,000/70 =
. Manufacturing costs also do not change.
y the cost which does not change

Stillwater Designs without any

prices to reflect the additional
eases may be needed to reflect the

$350,000
$1,190,000

$17,000 per order

20

ide the plant. Stillwater

begin negotiations for achieving some
The benefits of long-term
demands made on other activities.

Total 1st Qtr

129,000
12,750
163,750

April
51,000

6,700
135,050

5.5 gal of chemicals

x

43,800 =

Ending Inventory
$

5.5 gal of chemicals

x

41,000 =

33,825

5.5 gal of chemicals

x

50,250 =

41,456

Mar
$

50,250

Units

Feb
41,000
5.5
225,500
41,456
266,956
33,825
233,131
2.00
$ 466,263

Units
1 Drum

43,800 =

Ending Inventory
$

36,135

6,570

1 Drum

41,000 =

6,150

1 Drum

50,250 =

7,538

Feb

Sept

19,250.00
43,400.00
18,200.00
80,850.00

41,000
1
41,000
7,538
48,538
6,150
42,388
1.60
67,820

Mar
$

50,250

July
260,000.00 end invent Apr
May
June

29,000.00
6,570.00
10,050.00

1,200.00

11,250.00

240,000.00
220,000.00
260,000.00

0.30
0.30
0.30

72,000.00
66,000.00
78,000.00