1.The company's warehouse has been busy taking in and shipping out vendor- supplied automotive parts. Table 6.13 shows the warehouse's activities in eight consecutive periods, during which time the price of the parts has steadily increased.
TABLE 6.13
FIFO and LIFO Computation
Period Units In Unit Price Paid ($)Units Out
1 150 100 -
2 250 120 -
3 - - 180
4 - - 100
5 100 130 -
6 - - 200
7 100 140 -
8 - - 80
a. Determine the total LIFO prices for each stock withdrawal in periods 3, 4, 6, and 8.
b. Repeat the same price computation using the FIFO technique.
2. A manufacturing company makes three products, A, B, and C. The fixed FO is $60,000, consisting of $10,000 for material handling, material waste, and procurement; $30,000 for rent and utilities; and $20,000 for safety and canteen costs. Other costs are shown in Table 6.16
|
|
Product A
|
Product B
|
Product C
|
|
Number of Units Produced Per Month(-)
|
250
|
400
|
900
|
|
Total Material Costs Per Month($)
|
5000
|
8000
|
4000
|
|
Labor Hours Per Unit(hr)
|
4
|
3.5
|
1.5
|
|
Labor Rate Per Unit($/hr)
|
25
|
20
|
30
|
|
Machine Hours Per Unit(hr)
|
1
|
1
|
3
|
a. Determine the product cost for products A, B, and C, using the ABC method.
b. If products A, B, and C are sold at $400, $350, and $150 per unit, respectively, what is the gross profit for each product?
c. What is the company's total gross profit per month if all units produced are sold?
3. You are considering a good-looking Toyota hybrid car priced at $28,000 or an elegant GM luxury car at $24,000. The fuel efficiency is rated at 50 miles per gallon for the Toyota and 25 miles per gallon for the GM. The annual maintenance cost for both cars is about 0.5% of the car price.
The gasoline in the local market is selling at $2.00 per gallon. The cars are to be driven about 10,000 miles per year. You plan to keep your car for five years only. At the end of the fifth year, the resale values of the Toyota and the GM are about 40% and 30%, respectively, of their original prices. The interest rate is 6%.
Which car is the better choice from the standpoint of costs?
4. Company X manufactures automotive door panels that may be made of either sheet metal or plastic sheet molding (glass fiber-reinforced polymer).
Sheet metal bends well to the high-volume stamping process and has a low material cost. Plastic sheet molding meets the required strength and corrosion resistance and has a lower weight. The plastic-forming process involves a chemical reaction and has a slower cycle time.
Table 6.18 summarizes the cost components for each. Assuming that the machinery and tooling have no salvage value at the end of their respective equipment lives, what is the annual production volume that would make the plastic panel more economical?
For production volume up to 536,156 panels per year, the plastic panels are more economical.
TABLE 6.18
Cost Components for Door Panels
Description Plastic Sheet Metal
Material cost ($ per panel) 5 2
DL cost ($ per hour) 40 40
FO ($ per year) 500,000 400,000
Maintenance expenses ($ per year) 100,000 80,000
Machinery investment ($) 3 million 25 million
Tooling investment ($) 1 million 4 million
Equipment life (years) 10 15
Cycle time (minutes per panel) 2 0.1
Interest rate (%) 6 6
5. Company X produces two products, A and B. Table 6.19 summarizes the cost structures of these two products over a three-month period.
The company's manufacturing operation is limited to 30,000 machine hours available per a three-month period. Furthermore, because of a prior sales commitment, the company must produce at least 1000 units of Product B. Determine the maximum profit the company can achieve in a three-month period.
TABLE 6.19
Cost Structures over Three Months
Product A Product B
Selling price ($ per unit) 10 12
Variable cost ($ per unit) 5 10
Fixed costs ($) 600 2,000
Machining time (hour per unit) 0.5 0.25