Question 24 Figure 7-3. Hamilton Company manufactures engines. Hamilton produces

Question

Question 24

Figure 7-3.
Hamilton Company manufactures engines. Hamilton produces all the parts necessary for its engines except for one electronic component, which is purchased from two local suppliers: Traynor, Inc. and Bello Company. Both suppliers are reliable and rarely deliver late; however, Traynor sells the component for $10.00 per unit and Bello sells the same component for $8.95. Hamilton purchases 70 percent of its components from Bello, because of the lower price. The total annual demand is 75,000 units.

I. Activity Data
Activity Cost
Inspecting components (sampling only) $190,000
Reworking products (due to failed component) $2,254,000
Warranty work (due to failed component) $1,723,000

II. Supplier Data
Traynor, Inc. Bello Company

Units Purchase Price $10.00 $8.95
Units Purchased 22,500 52,500
Sampling Hours 50 2,450
Rework hours 135 3,625
Warranty hours 475 6,000

Refer to Figure 7.3. Calculate the activity rate for inspecting components based on sampling hours.
Answer
$78 per hour

$72 per hour

$76 per hour

$80 per hour

$77.55 per hour

Question 25

Figure 7-3.
Hamilton Company manufactures engines. Hamilton produces all the parts necessary for its engines except for one electronic component, which is purchased from two local suppliers: Traynor, Inc. and Bello Company. Both suppliers are reliable and rarely deliver late; however, Traynor sells the component for $10.00 per unit and Bello sells the same component for $8.95. Hamilton purchases 70 percent of its components from Bello, because of the lower price. The total annual demand is 75,000 units.

I. Activity Data
Activity Cost
Inspecting components (sampling only) $190,000
Reworking products (due to failed component) $2,254,000
Warranty work (due to failed component) $1,723,000

II. Supplier Data
Traynor, Inc. Bello Company
Units Purchase Price $10.00 $8.95
Units Purchased 22,500 52,500
Sampling Hours 50 2,450
Rework hours 135 3,625
Warranty hours 475 6,000


Refer to Figure 7.3. Calculate the activity rate for reworking products based on rework hours.
Answer
$599 per hour

$595 per hour

$602 per hour

$605 per hour

$622 per hour


Question 26
Figure 7-3.
Hamilton Company manufactures engines. Hamilton produces all the parts necessary for its engines except for one electronic component, which is purchased from two local suppliers: Traynor, Inc. and Bello Company. Both suppliers are reliable and rarely deliver late; however, Traynor sells the component for $10.00 per unit and Bello sells the same component for $8.95. Hamilton purchases 70 percent of its components from Bello, because of the lower price. The total annual demand is 75,000 units.

I. Activity Data
Activity Cost
Inspecting components (sampling only) $190,000
Reworking products (due to failed component) $2,254,000
Warranty work (due to failed component) $1,723,000

II. Supplier Data
Traynor, Inc. Bello Company
Units Purchase Price $10.00 $8.95
Units Purchased 22,500 52,500
Sampling Hours 50 2,450
Rework hours 135 3,625
Warranty hours 475 6,000

Refer to Figure 7.3. Calculate the activity rate for warranty work based on warranty hours.
Answer
$268 per hour

$266 per hour

$264 per hour

$262 per hour

$287 per hour



Question 27
Figure 7-3.
Hamilton Company manufactures engines. Hamilton produces all the parts necessary for its engines except for one electronic component, which is purchased from two local suppliers: Traynor, Inc. and Bello Company. Both suppliers are reliable and rarely deliver late; however, Traynor sells the component for $10.00 per unit and Bello sells the same component for $8.95. Hamilton purchases 70 percent of its components from Bello, because of the lower price. The total annual demand is 75,000 units.

I. Activity Data
Activity Cost
Inspecting components (sampling only) $190,000
Reworking products (due to failed component) $2,254,000
Warranty work (due to failed component) $1,723,000



II. Supplier Data
Traynor, Inc. Bello Company
Units Purchase Price $10.00 $8.95
Units Purchased 22,500 52,500
Sampling Hours 50 2,450
Rework hours 135 3,625
Warranty hours 475 6,000

Refer to Figure 7.3. Calculate the total activity cost per component associated with using Traynor, Inc., as the supplier.
Answer
$15.75

$10.00

$19.38

$20.00

$22.80



Question 28

Using the original design, a machine requires 12 hours of setup time. By redesigning the machine, the setup time is reduced by 25 percent. The cost per setup hour is $225. Calculate the reduction in nonvalue-added cost per setup.
Answer
$675 per setup

$225 per setup

$450 per setup

$800 per setup

$2,025



Question 29

Inspection time for a plant is 10,000 hours per year. The cost of inspection consists of salaries of four inspectors, totaling $60,000. Inspection also used supplies costing $3 per inspection hour. The company has a close to zero defect state and has eliminated the need for any inspection activity. Calculate the nonvalue-added cost of inspection per year.
Answer
$30,000

$60,000

$90,000

$120,000

Explanation / Answer

Question 24 Figure 7-3. Hamilton Company manufactures engines. Hamilton produces all the parts necessary for its engines except for one electronic component, which is purchased from two local suppliers: Traynor, Inc. and Bello Company. Both suppliers are reliable and rarely deliver late; however, Traynor sells the component for $10.00 per unit and Bello sells the same component for $8.95. Hamilton purchases 70 percent of its components from Bello, because of the lower price. The total annual demand is 75,000 units. I. Activity Data Activity Cost Inspecting components (sampling only) $190,000 Reworking products (due to failed component) $2,254,000 Warranty work (due to failed component) $1,723,000 II. Supplier Data Traynor, Inc. Bello Company Units Purchase Price $10.00 $8.95 Units Purchased 22,500 52,500 Sampling Hours 50 2,450 Rework hours 135 3,625 Warranty hours 475 6,000 Refer to Figure 7.3. Calculate the activity rate for inspecting components based on sampling hours. Answer $76 per hour Question 25 Figure 7-3. Hamilton Company manufactures engines. Hamilton produces all the parts necessary for its engines except for one electronic component, which is purchased from two local suppliers: Traynor, Inc. and Bello Company. Both suppliers are reliable and rarely deliver late; however, Traynor sells the component for $10.00 per unit and Bello sells the same component for $8.95. Hamilton purchases 70 percent of its components from Bello, because of the lower price. The total annual demand is 75,000 units. I. Activity Data Activity Cost Inspecting components (sampling only) $190,000 Reworking products (due to failed component) $2,254,000 Warranty work (due to failed component) $1,723,000 II. Supplier Data Traynor, Inc. Bello Company Units Purchase Price $10.00 $8.95 Units Purchased 22,500 52,500 Sampling Hours 50 2,450 Rework hours 135 3,625 Warranty hours 475 6,000 Refer to Figure 7.3. Calculate the activity rate for reworking products based on rework hours. Answer $599 per hour Question 26 Figure 7-3. Hamilton Company manufactures engines. Hamilton produces all the parts necessary for its engines except for one electronic component, which is purchased from two local suppliers: Traynor, Inc. and Bello Company. Both suppliers are reliable and rarely deliver late; however, Traynor sells the component for $10.00 per unit and Bello sells the same component for $8.95. Hamilton purchases 70 percent of its components from Bello, because of the lower price. The total annual demand is 75,000 units. I. Activity Data Activity Cost Inspecting components (sampling only) $190,000 Reworking products (due to failed component) $2,254,000 Warranty work (due to failed component) $1,723,000 II. Supplier Data Traynor, Inc. Bello Company Units Purchase Price $10.00 $8.95 Units Purchased 22,500 52,500 Sampling Hours 50 2,450 Rework hours 135 3,625 Warranty hours 475 6,000 Refer to Figure 7.3. Calculate the activity rate for warranty work based on warranty hours. Answer $266 per hour Question 27 Figure 7-3. Hamilton Company manufactures engines. Hamilton produces all the parts necessary for its engines except for one electronic component, which is purchased from two local suppliers: Traynor, Inc. and Bello Company. Both suppliers are reliable and rarely deliver late; however, Traynor sells the component for $10.00 per unit and Bello sells the same component for $8.95. Hamilton purchases 70 percent of its components from Bello, because of the lower price. The total annual demand is 75,000 units. I. Activity Data Activity Cost Inspecting components (sampling only) $190,000 Reworking products (due to failed component) $2,254,000 Warranty work (due to failed component) $1,723,000 II. Supplier Data Traynor, Inc. Bello Company Units Purchase Price $10.00 $8.95 Units Purchased 22,500 52,500 Sampling Hours 50 2,450 Rework hours 135 3,625 Warranty hours 475 6,000 Refer to Figure 7.3. Calculate the total activity cost per component associated with using Traynor, Inc., as the supplier. Answer $ 9.38 Question 28 Using the original design, a machine requires 12 hours of setup time. By redesigning the machine, the setup time is reduced by 25 percent. The cost per setup hour is $225. Calculate the reduction in nonvalue-added cost per setup. Answer $675 per setup Question 29 Inspection time for a plant is 10,000 hours per year. The cost of inspection consists of salaries of four inspectors, totaling $60,000. Inspection also used supplies costing $3 per inspection hour. The company has a close to zero defect state and has eliminated the need for any inspection activity. Calculate the nonvalue-added cost of inspection per year. Answer $90,000

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