Costing Model: There are two costing models that can be used to allocate costs: traditional costing and activity based costing. Both costing models allocate direct material costs, direct labor costs and manufacturing overhead costs to the products being manufactured. However, the difference between the two models involves how the manufacturing overhead costs are allocated. Traditional costing allocates overhead costs to the products manufactured on the either direct labor hours, number of units produced, or machine hours used in production. The traditional costing method lumps all overhead costs into a single pool and allocates those costs across all products produced based on one of the three cost drivers (direct labor hours, number of units produced, or machine hours).
1. Provide the definitions of throughput, inventory and operational expense given in The Goal. How do they compare with the traditional definitions? Do you find them useful, and why? Throughput is the rate at which the system generates money through sales while inventory is all the money that the system has invested in purchasing things which it intends to sell.
Do you Agree or disagree? Give at least three specific reasons for your answer and provide at least one counter argument and rebut it. Week 2 Discussion Questions Question A Provide and discuss an example of a situation where a company would use a job cost sheet. As part of your analysis, be sure to explain the nature and importance of a job cost sheet. Question B Discuss the advantages and disadvantages of Job Order Costing.
Throughput rate of the system can be determined by comparing arrival rate and processing rate. The minimum of two is the actual Throughput rate R R = min(Ri, Rp) Throughput varies from day to day and hour to hour as per exhibit 4. Maximum and minimum throughput can be used to calculate number of tellers for various levels of utilization. 2. Capacity utilization ‘u’ is the average fraction of the server pool capacity that is busy processing customers, i.e.
4. What is the trade-off between overtime costs and inventory
LabCo negotiates all its contracts with its customers on either a fixed-price or cost-plus basis. LabCo has developed an accounting policy to recognize revenue related to its customized construction contracts, which reads as follows: The Company performs under a variety of contracts, some of which provide for reimbursement of cost plus fees, and others that are fixed-price-type contracts. Revenues and fees on these contracts are primarily recognized on a contract-bycontract basis using the percentage-of-completion method of accounting, which is most often based on contract costs incurred to date compared with total estimated costs at completion (cost-to-cost method). The completed-contract method of accounting is used in instances in which reliably dependable estimates of the total costs to be incurred under a specific contract cannot be made. LabCo has entered into a contract with a customer, Halibut, to build a six-axis laser cutting machine that will be used by Halibut to cut airplane wings for a new fighter jet that will be sold by Halibut to a large government buyer.
This figure definitely could be different for different customers. 4. Suppose one of GP Manufacturing’s executives typically uses the payback as a primary capital budgeting decision tool and wants some payback information. a. What is the project’s payback period?
Costing the activity is normally an in-between step in the distribution of overhead costs to products, to acquire more precise product cost information. However, occasionally the activity itself is the cost object of interest. Like for example, manager of a company might desire to know how much the company spends to acquire their raw materials, as input in a sourcing judgment. The activity of acquiring the raw materials incurs costs associated with negotiating prices with suppliers, issuing purchase orders, receiving fabric, inspecting fabric, and processing payments and returns. The steps to product costing are: 1) Identify the cost;
At each station, a portion of the total work is performed on each unit. 4. What is meant by the term manning level in the context of a manual assembly line? Answer:
For production, there were various personnel in-charge of both order and volume related work, these include stock persons, production planners, foremen, operators and people responsible over products ready for transportation. Old cost system There were two pools of indirect costs which were manufacturing costs allocated on a basis of direct labor, and selling/admin costs that were treated as period costs. Production overhead, selling and admin costs were all fixed. Most of the company’s sales, marketing and admin. costs were recognised as a percentage of sales revenue.