Cost Accounting (14th Edition)

PROBLEM FOR SELF-STUDY 365
Cumulative average-time per unit for the Xth unit in column H is calculated as y =
aX b ; see Exhibit 10-10 (p. 359). For example, when X = 3, y = 2,000 * 3 –0.234465 =
1,546 labor-hours.
b. The following calculations show the machine-intensive assembly method based on
a 90% incremental unit-time learning model:
1
2
3
4
5
6
7
8
9
10
11
12
13
G
H
I
J
K
Cumulative Individual
Cumulative
Cumulative
Number
Unit Time
Total Time:
Average Time
of Units for Xth Unit (y):
Labor-Hours
Per Unit:
1
Labor-Hours
800
800
Labor-Hours
Col K = Col J ÷ Col G
800
2 720 (800 × 0.9) 1,520 760
3
677
2,197
732
4 648 (720 × 0.9) 2,845 711
5
626
3,471
694
6
609
4,081
680
7
595
4,676
668
8 583 (648 × 0.9) 5,258 657
Individual unit time for the Xth unit in column H is calculated as y = aX b ; see Exhibit 10-11
(p. 360). For example, when X = 3, y = 800 * 3 –0.152004 = 677 labor-hours.
2. Total costs of assembling the first eight helicopters are as follows:
1
2
3
4
5
6
7
8
9
10
11
12
13
O
P
Q
Labor-Intensive
Machine-Intensive
Assembly Method
Assembly Method
(using data from part 1a) (using data from part 1b)
Direct materials:
8 helicopters × $40,000; $36,000 per helicopter $320,000 $288,000
Direct-assembly labor:
9,826 hrs.; 5,258 hrs. × $30/hr.
Indirect manufacturing costs
Equipment related
9,826 hrs. × $12/hr.; 5,258 hrs. × $45/hr.
294,780
117,912
157,740
236,610
Materials-handling related
0 .50×$320,000; $288,000
160,000
144,000
T otal assembly costs
$892,692
$826,350
The machine-intensive method’s assembly costs are $66,342 lower than the laborintensive
method ($892,692 – $826,350).