Question # 1
The Geely car company makes three types of cars small, midsize and SUV. There has been some issue with determining a production schedule that is more in line with customer needs. Management has it that making more SUV's will improve the company's profitability and they are asking you to take a look in to this. A consultant has suggested that it would make more sense for them to use the ABC accounting method to determine their production plan. See the tables below and answer all the questions that follow. Also conclude by suggesting which method would be in their best interests.
Table 1
|
Product
|
Raw Material Cost
($/Unit)
|
Price
($/Unit)
|
Minimum Demand
(Units per Month)
|
Maximum Demand
(Units per Month)
|
|
Small Car
|
$10,000.00
|
$20,000.00
|
500
|
900
|
|
Mid Size Car
|
$12,000.00
|
$35,000.00
|
350
|
500
|
|
SUV
|
$15,000.00
|
$45,000.00
|
290
|
500
|
Table 2
|
Product
|
Motor Assembly
(Minimum Time Per Unit in minutes)
|
Final Assembly
(Minimum Time Per Unit in minutes)
|
Test
(Minimum Time Per Unit in minutes)
|
Minimum Amount of time for assembly (in minutes)
|
|
Small Car
|
3
|
2
|
1
|
3
|
|
Mid Size Car
|
4
|
3
|
4
|
5
|
|
SUV
|
5
|
6
|
5
|
7
|
Table 3
|
Hours Per Month in one 8 hour shift for 250 Workers
|
60000
|
hrs
|
|
Hourly Labor Costs per worker
|
$25.00
|
|
|
Overhead Costs
|
$20,000,000.00
|
|
|
Number of Workers
|
250
|
Workers
|
1. The new production schedule, due to the recession, calls for 859 small car, 375 mid-size car and 280 SUV's to be made. (See first worksheet in excel to provide all your answers to this question). Using the Traditional method of accounting:
a. Determine the amount of time it takes to make each product in the production plan?
b. Determine the material costs for this production plan?
c. Determine the Labor costs for this production plan?
d. Determine the Overhead costs for this production plan?
e. Determine the revenue that is generated from this production plan?
f. Determine the profit per product with this production plan?
g. Determine the profit per unit based on the traditional cost allocation method?
h. Determine the Total Profit of the Company based on this production plan?
Table 4.
|
Category
|
Plant and Equipment
|
Management
|
Purchasing
|
Sales and Shipping
|
|
Total Cost
|
$ 7,000,000.00
|
$ 5,000,000.00
|
$4,500,000.00
|
$3,500,000.00
|
|
Cost Allocation
|
Square feet
|
Labor hours
|
Purchase orders
|
Customer orders
|
|
Total units used
|
1200000
|
650000
|
95573
|
5030
|
|
Small Car
|
200000
|
50000
|
5320
|
280
|
|
Mid Size Car
|
400000
|
300000
|
28500
|
1500
|
|
SUV
|
600000
|
300000
|
61753
|
3250
|
Note: The production plan stays the same for both cost allocation methods 2. Using the same production and now the ABC method do the following (See first worksheet in excel to provide all your answers to this question)
a. Determine how overhead cost is allocated for each product base on the department of origin?
b. Determine the profit per product with this production plan?
c. Determine the Profit per unit based on the Activity Based Cost Allocation Method?
d. Determine the Total Profit of the Company based on this production plan?
Question # 2
The table below represents the process taken for the making of an Integrated circuit. You have been hired to review the operations of this facility and also to determine if this facility is performing at its best.
|
Process
|
Rate (p/hr)
|
Time (hr)
|
|
Lamination
|
125.7
|
8.6
|
|
Machining
|
143.6
|
5.7
|
|
Internal Circuitize
|
230.3
|
9.2
|
|
Optical Test/Repair - Int
|
150.5
|
3
|
|
Lamination – Composites
|
180.8
|
2.4
|
|
External Circuitize
|
159.9
|
3.2
|
|
Optical Test/Repair - Ext
|
150.5
|
1
|
|
Drilling
|
185.9
|
10.2
|
|
Copper Plate
|
136.4
|
7.8
|
|
Procoat
|
143.9
|
9.5
|
|
Sizing
|
126.5
|
10.2
|
|
EOL Test
|
169.5
|
2.5
|
a. How long does it take for a product to go through the entire production line?
b. What is the critical amount of WIP (w0) needed by this facility?
3. If the facility has an average cycle time of 250hrs and an average WIP of 23000 chips what is the average throughput of the line?
4. What is the Practical Worst Case cycle time of this line? Is this line doing well?
5. What is the takt time of the line given that 900 chips have to be made over the course of 890 hrs?
6. Can the production line make this takt time?
7. How many machines will be needed at each station?