Question

Cycle Time, Welocity, Product Costing Goldman Company has a IT system in place. Each manufacturing coll is dedicated to the production of a single product or major subassembly. One cell, dedicated to the production of telescopes, has four operations machining finishing, assembly and qualifying (eng). For the coming year, the telescope cell has the following budgeted costs and cell time (both at theoretical capacity) Budgeted conversion costs $9,000,000 59,750,000 Budgeted raw materials Celtime 12,000 hours Theoretical output 000 copes During the year, the following actual results were obtained: Actual conversion costs Actual material 57,400,000 12,000 hours 90.000 copes

Answer 1

Goldman Company Requirement 1 Theoretical velocity = Number of telescopes per hour = Theoretical output/ cell time = 96,000 telescopes / 12,000 hours = 8 telescopes per hour Theoretical cycle time = Number of hours or minutes per telescope 8 telescopes = 1 hour 1 telescope = 60 minutes / 8 = 7.5 minutes per telescope Requirement 2 Actual velocity = Actual output / Actual cell time = 90000 telescopes / 12000 hours = 7.5 telescopes per hour Actual cycle time = 60 minutes / 7.5 = 8 minutes per telescope Requirement 3 Budgeted conversion costs per minute = Budgeted conversion costs / Budgeted minutes of cell time = $9,000,000 / (12,000 hours * 60 minutes per hour) = $12.5 per minute Theoretical conversion costs per telescope = Conversion costs for 1 telescope = 7.5 minutes per telescope * $12.5 per minute = $93.75 Actual conversion costs per telescope = Theoretical conversion costs per telescope * actual output = $93.75 per telescope * 90,000 telescopes = $8,437,500