Taylor Corporation produces two models of their leather brief cases: deluxe and
ID: 2409640 • Letter: T
Question
Taylor Corporation produces two models of their leather brief cases: deluxe and standard. The four activities and four drivers are as follows:
Hours
Activities:
Cost
Driver
Deluxe
Standard
Total
Cutting
$ 96,000
Cutting hours
2,200
1,300
3,500
Assembling
42,000
Assembly hours
1,150
980
2,130
Inspecting
15,000
Inspection hours
800
500
1,300
Reworking
8,000
Rework hours
20
35
55
Required:
Calculate the consumption ratios for the four drivers, rounding to 2 decimal places.
Calculate the activity rates that would be used to assign costs to each product. Round your answer to two decimal places.
Calculate the unit cost assuming that 500 deluxe models were produced and 700 standard models were produced, rounded to the nearest cent.
Hours
Activities:
Cost
Driver
Deluxe
Standard
Total
Cutting
$ 96,000
Cutting hours
2,200
1,300
3,500
Assembling
42,000
Assembly hours
1,150
980
2,130
Inspecting
15,000
Inspection hours
800
500
1,300
Reworking
8,000
Rework hours
20
35
55
Explanation / Answer
1) CONSUMPTION RATIOS: Hours CONSUMPTION RATIO Activities: Driver Deluxe Standard Total Deluxe Standard Cutting Cutting hours 2,200 1,300 3,500 0.63 0.37 Assembling Assembly hours 1,150 980 2,130 0.54 0.46 Inspecting Inspection hours 800 500 1,300 0.62 0.38 Reworking Rework hours 20 35 55 0.36 0.64 Note: Consumption ratio for Cutting: For deluxe = 2200/3500 = 0.63; for standard = 1300/3500 = 0.37 For other activities, ratios have been worked out as above. 2) ACTIVITY RATES: Hours Activities: Cost Driver Deluxe Standard Total Activity Rates = Cost/ Total Hours Cutting 96000 Cutting hours 2,200 1,300 3,500 27.43 Assembling 42000 Assembly hours 1,150 980 2,130 19.72 Inspecting 15000 Inspection hours 800 500 1,300 11.54 Reworking 8000 Rework hours 20 35 55 145.45 3) UNIT COST: Units produced 500 700 Cutting 60343 35657 96000 Assembling 22676 19324 42000 Inspecting 9231 5769 15000 Reworking 2909 5091 8000 Total cost 95159 65841 161000 Cost per unit $ 190.32 $ 94.06
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