Question

7. Determine the unit costs and total unit cost for the crankshaft if 10,000 units were pro- duced (a recording error was made and 10,000 were made instead of 8,000) and compare the results (costs and profits) to the 8,000 total and unit costs of Tables 3.4 and 3.5. Assume all other values remain the same as in Tables 3.3, 3.4, and 3.5. Table 3.3: Cost data for overhead evaluations for an automotive metal casting facility Casting Products Produced Crank- Rear Exhaust Total # of Total OH OH Rate Piston shaft Axel Manifold Activity Cost - $ ($/unit) 120 300 200 380 1,000 56,000 56 200 350 450 400 1,400 56,000 40 2,000 4,000 2,000 2,000 10,000 500,000 50 Overhead Item/ Cost Driver Activity # of Purchase Orders Orders Material Handling # of Moves Depreciation # of Machine Expense Hours # of Machine Utility Costs Hours Factory Expenses Administrtive Expenses Total Expenses 2,000 4,000 2,000 2,000 10,000 40,000 500,000 400,000 1,552,000 Table 3.4: Unit cost determination Piston Total # of Total OH OH Rate Activity Cost - $ (S/unit) 40 13,000 10,000 520,000 40,000 Casting Products Produced Crank- Rear Exhaust Production Data shaft Axel Manifold Production Units 38,000 8,000 6,700 34,000 Selling Price: $/unit 10 13275 23 Direct Labor: hours 1,000 5,000 2,000 5,000 Utility Cost: Machine hours 2,000 4,000 2,000 2,000 Direct Unit Costs and Overhead Activities Directly Related to Products Crank- Rear Exhaust Production Costs Piston shaft Axel Manifold Direct Materials S/unit 4.000 32.000 19.000 6.000 Direct Labor $/unit 1.053 25.000 11.940 5.882 Purchase OH $/unit 0.177 2.100 1.672 0.626 Material Handling $/unit 0.211 1.750 2.687 0.471 Depreciation Expenses S/unit 2.632 25.000 14.925 2.941 Machine Utility $/unit 0.211 2.000 1.194 0.235 Total Direct Costs $/unit 8.284 87.850 51.418 16.155 Table 3.5: Total product cost using different time basis Direct Labor Hour Basis for Factory and Administrative Overhead Unit Costs Piston Crank-shaft Rear Axel Exhaust Manifold Total Direct Costs $/unit 8.284 87.850 51.418 16.155 Factory OH $/unit 1.012 24.038 11.481 5.656 Adminisstrative OH $/unit 0.810 19.231 9.185 4.525 Total Product Cost $/unit 10.106 131.119 72.084 26.336 Selling Price $/unit 10.000 132.000 75.000 23.000 Product Profit/Loss $/unit -0.106 0.881 2.916 -3.336 Machine Hour OH Basis for Factory and Administrative Overhead Unit Costs Piston C rank-shaft Rear Axel Exhaust Manifold, Total Direct Costs $/unit 8.284 87.850 51.418 16.155 Factory OH $/unit 2.632 25.000 14.925 2.941 Adminisstrative OH $/unit 2.105 20.000 11.940 2.353 Total Product Cost $/unit 13.021 1 32.850 78.284 21.449 Selling Price $/unit 10.000 132.000 75.000 23.000 Product Profit/Loss $/unit -3.021 -0.850 -3.284 1.551 Total of Machine plus Labor Hour OH Basis for Factory and Administrative Overhead Unit Costs Piston Crank-shaft Rear Axel Exhaust Manifold Total Direct Costs 8.284 87.850 51.418 16.155 Factory OH $/unit 1.716 24.457 12.979 4.476 Administrative OH $/unit 1.373 19.565 10.383 3.581 Total Product Cost $/unit 11.373 131.872 74.779 24.212 Selling Price $/unit 10.000 132.000 75.000 23.000 Product Profit/Loss $/unit -1.373 0.128 0.221 -1.212

Answer 1

Particulars	Piston	Crankshaft	Rearaxel	Exhaust Manifold
Production ( Units)	38,000	10,000	6,700	34,000
Material Cost/ Unit	$                     4	$                   32	$                    75	$                             23
Direct Material Cost	$        152,000	$        320,000	$          502,500	$                  782,000
Labour Hours	1000	5000	2000	5000
Labour Cost @ $ 40/ Labour Hr	$          40,000	$        200,000	$            80,000	$                  200,000
Machine Hours	2000	4000	2000	2000
Utility Cost @ $ 4 / Mchn Hour	$             8,000	$           16,000	$              8,000	$                       8,000
Purchase Orders	120	300	200	380
Purchase Order Cost	$             6,720	$           16,800	$            11,200	$                     21,280
# Moves	200	350	450	400
Material Handling Costs @ $ 40 /Moves	$             8,000	$           14,000	$            18,000	$                     16,000
Machine Hours	2000	4000	2000	2000
Depreciation Expense@ $ 50 / Hr	$        100,000	$        200,000	$          100,000	$                  100,000
Total Direct Costs	$        314,720	$        766,800	$          719,700	$               1,127,280
Direct Costs / Unit	$               8.28	$             76.68	$            107.42	$                       33.16
Machine + Labour Hours	$       3,000.00	$       9,000.00	$        4,000.00	$                 7,000.00
Factory OH	$    65,217.39	$ 195,652.17	$      86,956.52	$            152,173.91
Factory OH /Unit	$               1.72	$             19.57	$              12.98	$                         4.48
Admin OH	$    52,173.91	$ 156,521.74	$      69,565.22	$            121,739.13
Admin OH / Unit	$               1.37	$             15.65	$              10.38	$                         3.58
Total Cost / Unit	$             11.37	$           111.90	$            130.78	$                       41.21
Selling Price	$             10.00	$           132.00	$              75.00	$                       23.00
(Loss) / Profit Unit	$             (1.37)	$             20.10	$            (55.78)	$                     (18.21)