Decision making with job order costs Raneri Trophies Inc. uses a job order cost
ID: 2333265 • Letter: D
Question
Decision making with job order costs Raneri Trophies Inc. uses a job order cost system for determining the cost to manufacture award products (plaques and trophies). Among the company's products is an engraved plaque that is awarded to participants who complete a training program at a local business. The company sells the plaques to the local business for $80 each. Each plaque has a brass plate engraved with the name of the participant. Engraving requires approximately 30 minutes per name. Improperly engraved names must be redone. The plate is screwed to a walnut backboard. This assembly takes approximately 15 minutes per unit. Improper assembly must be redone using a new walnut backboard. During the first half of the year, Raneri had two separate plaque orders. The job cost sheets for the two separate jobs indicated the following information: Job 101 May 4 Cost per Unit Units Job Cost Direct materials Wood Brass Engraving labor Assembly labor $20/unit 15/unit 20/hr 30/hr 10/hr 40 units 800 600 400 300 300 $2,400 40 $60 40 units 20 hrs. 10 hrs. 30 hrs. Factory overhead Plaques shipped Cost per plaque June 10 Cost per Unit Job 105 Units Job Cost Direct materials Wood Brass Engraving labor Assembly labor $20/unit 34 units 680 510 340 255 255 $2,040 + 30 68 15/unit 20/hr. 30/hr. 10/hr. 34 units 17 hrs. 8.5 hrs. 25.5 hrs. Factory overhead Plaques shipped Cost per plaque a. Why did the cost per plaque increase from $60 to $68? The cost of the plaques increased because Job 105 used b. What improvements would you recommend for Raneri Trophies Inc.? per unit than did Job 101Explanation / Answer
a.
Job 105 used 34 units of wood and brass each for shipping 30 units of plaque where as Job 101 used exactly same number of wood and brass as the number of plaque shipped.
Engraving time per unit for Job 105 =17 hrs /30 = 17 x 60 min/30 = 1,020 min/30 = 34 minutes
Assembling time per unit for Job 105 = 8.5 hrs /30 = 8.5 x 60 min/30 = 510 min/30 = 17 minutes
Job 105 used more labor time than job 101. Engraving time of 4 minutes and Assembling time of 2 minutes extra per unit has been used for job 105. As a result engraving, assembling and factory overhead cost also increased.
The cost of plaque increased because job 105 used more direct material and labor per unit than did job 101.
b.
Operators of engraving and assembly lines should be properly trained to check the unsystematic works. Initiative measures are required to reduce the rework process.
The names should be supplied to engraver in a clear readable manner. Assembly operators should be provided fixtures in order to proper alignments of the plates to backboard.
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