3. Simpson Inc. produces a specialty
top-quality juice machine. The product,
the GK 78, requires four processes to be completed. Specifically, these processes are exterior
construction, pulp filter insertion, painting, and packaging. Each function is performed at separate
workstations with different completion ratios:

? Exterior
construction can manufacture 100,000 juicer exteriors per day.
? Pulp
filter insertion can install 30,000 filters every 6 hours.
? Painting
can decorate 5,000 juicers every half hour.
? Packaging
can package 8,000 juicers per hour.

Required:

a) How many
GK 78 machines can Simpson Inc. manufacture per month (assume an average of 30
days per month and 8 hours per day)?
b) On which
function should Simpson spend money to improve throughput?
c) If
Simpson sells each juicer for $65 and has variable costs of $45, should Simpson
spend $300,000 to improve the workstation that is the current bottleneck until
a second workstation becomes a bottleneck?

4. A company sells three products, X,
Y, and Z, with the following characteristics:

Product X Product Y
Product Z

Price per unit $18 $21 $25
Variable cost per unit $12 $15 $23
Expected sales (units) 200,000 300,000 400,000

Fixed costs are expected to be $2,300,000.

Required:
a) Using the
information provided above, what is the expected level of the operating
profits?
b) Compute
the break-even point in revenues for the company assuming a constant product
mix.

5. Alpha Company produces a variety of
electronic equipment. One of its plants
produces printers, the superior and the regular. At the beginning of the
year 2014, the following data were prepared for this plant:

Superior Regular

Quantity 200,000 900,000
Selling
price $500.00 $200.00
Unit
prime cost* $200.00 $90.00
Unit
overhead cost $32.50 $100.00

Prime
cost equals direct materials and direct labor.

The unit
overhead cost is calculated using the predetermined overhead application
rate based on
direct labor-hours.

Upon examining the data, the manager of marketing was particularly
impressed with the per-unit
profitability of the superior printer and suggested that more emphasis be
placed on producing and selling this product.
The plant supervisor objected to this strategy, arguing that the cost of
the superior printer was understated. He
argued that overhead costs could be assigned more accurately by using multiple
cost drivers that reflected each products consumption. To convince top management that multiple
rates could produce a significant difference in product costs, he obtained the
following projected information from the controller for the preceding
production output:

Activity
Consumption

Overhead Activity Cost
Driver Pool Rate* Superior Regular
Setups Number
of setups $3,000 200 100
Machine costs Machine-hours $ 100
200,000 600,000
Engineering Engineering-hours
$ 40 45,000 120,000
Packing Packing orders $ 30 80,000 220,000

*Cost per unit of cost driver Total overhead cost =
$96,500,000

Required:

a) Using the
projected data based on traditional costing, calculate gross profit per unit,
and total gross profit for each product.
b) Using the
pool rates, calculate the overhead cost per unit for each product. Using this new unit cost, calculate gross
profit per unit, and total gross profit for each product.
c) In view
of the outcome in requirement 2, evaluate the suggestion of the manager of
marketing to switch the emphasis to the superior model.
d) How does
activity based costing add to Alphas competitive advantage?3. Simpson Inc. produces a specialty
top-quality juice machine. The product,
the GK 78, requires four processes to be completed. Specifically, these processes are exterior
construction, pulp filter insertion, painting, and packaging. Each function is performed at separate
workstations with different completion ratios:? Exterior
construction can manufacture 100,000 juicer exteriors per day.? Pulp
filter insertion can install 30,000 filters every 6 hours.? Painting
can decorate 5,000 juicers every half hour.? Packaging
can package 8,000 juicers per hour.
Required:a) How many
GK 78 machines can Simpson Inc. manufacture per month (assume an average of 30
days per month and 8 hours per day)?b) On which
function should Simpson spend money to improve throughput?c) If
Simpson sells each juicer for $65 and has variable costs of $45, should Simpson
spend $300,000 to improve the workstation that is the current bottleneck until
a second workstation becomes a bottleneck?4. A company sells three products, X,
Y, and Z, with the following characteristics: Product X Product Y
Product ZPrice per unit $18 $21 $25Variable cost per unit $12 $15 $23Expected sales (units) 200,000 300,000 400,000
Fixed costs are expected to be $2,300,000.
Required:a) Using the
information provided above, what is the expected level of the operating
profits?b) Compute
the break-even point in revenues for the company assuming a constant product
mix.5. Alpha Company produces a variety of
electronic equipment. One of its plants
produces printers, the superior and the regular. At the beginning of the
year 2014, the following data were prepared for this plant: Superior Regular Quantity 200,000 900,000 Selling
price $500.00 $200.00 Unit
prime cost* $200.00 $90.00 Unit
overhead cost $32.50 $100.00 Prime
cost equals direct materials and direct labor. The unit
overhead cost is calculated using the predetermined overhead application rate based on
direct labor-hours. Upon examining the data, the manager of marketing was particularly
impressed with the per-unit
profitability of the superior printer and suggested that more emphasis be
placed on producing and selling this product.
The plant supervisor objected to this strategy, arguing that the cost of
the superior printer was understated. He
argued that overhead costs could be assigned more accurately by using multiple
cost drivers that reflected each products consumption. To convince top management that multiple
rates could produce a significant difference in product costs, he obtained the
following projected information from the controller for the preceding
production output: Activity
ConsumptionOverhead Activity Cost
Driver Pool Rate* Superior RegularSetups Number
of setups $3,000 200 100Machine costs Machine-hours $ 100
200,000 600,000Engineering Engineering-hours
$ 40 45,000 120,000Packing Packing orders $ 30 80,000 220,000 *Cost per unit of cost driver Total overhead cost =
$96,500,000Required:a) Using the
projected data based on traditional costing, calculate gross profit per unit,
and total gross profit for each product.b) Using the
pool rates, calculate the overhead cost per unit for each product. Using this new unit cost, calculate gross
profit per unit, and total gross profit for each product.c) In view
of the outcome in requirement 2, evaluate the suggestion of the manager of
marketing to switch the emphasis to the superior model.d) How does
activity based costing add to Alphas competitive advantage?