Question

During the week of August 21, Parley Manufacturing produced and shipped 4,000 units of its machine tools: 1,500 units of Tool SK1 and 2,500 units of Tool SK3. The cycle time for SK1 is 0.73 hour, and the cycle time for SK3 is 0.56 hour. The following costs were incurred: Parley Manufacturing Value-Stream Costs and Production Hours This Week, August 21 Net Hours Materials Salaries Machining Other Total Cost / Wages Order processing $4,500 400 50 $4,500 9,000 Production planning 9,000 Purchasing 6,750 Casting 200 500 600 125 150 $66,750 25,000 18,750 $9,000 $4,500 10,500 3,000 Grinding 6,750 116,625 49,000 36,375 10,500 12,500 2,625 Drilling 31,250 Inspection 2,625 150 2,250 2,250 Packaging and shipping Invoicing 325 3,000 3,000 Totals 2,500 $110,500 $87,500 $19,500 $7,500 $225,000

Answer 1

(2)

Particulars	Amount
Total cost	225,000.00
Less: material cost	110,500.00
Cost except material cost	114,500.00
Total units	4,000.00
Cost per unit	28.625	Per unit
Particulars	SK1	SK3
Material cost- $110500	60%	40%
Material cost- $110500	66,300.00	44200
Units shipped	1,500.00	2500
Cost per unit	44.20	17.680
COST PER UNIT:-
Particulars	SK1	SK3
Cost except material / unit	28.625	28.625
Material cost / unit	44.20	17.68
COST PER UNIT:-	72.825	46.305
Verification	SK1	SK3	Total
Units	1,500.00	2500
Total cost	109,237.50	115,762.50	225,000.00

Answer:

Unit cost for SK1 72.825

Unit cost for SK3 46.305

(3)DBC is duration based costing where time is used for allocating cost

Particulars	SK1	SK3
Units	1,500	2500
Cycle time	0.73	0.56	Hour
Total hours	1,095.00	1400.00
Total Hours	2,495.000
Total cost	225,000.00
Total Hours	2,495.00
Cost per hour	90.18
Particulars	SK1	SK3
Total hours	1,095.00	1,400.00
Cost per hour	90.18	90.18
Total cost	98,747.495	126,252.505
Units	1,500.00	2500
Cost per unit	65.8317	50.5010
OR
Particulars	SK1	SK3
Cost per hour	90.18	90.18
Cycle time	0.73	0.56	Hour
Cost per unit	65.8317	50.501

Unit cost per unit

Answer:

Unit cost for SK1 65.8317

Unit cost for SK3 50.501