Cost Accounting (14th Edition)

ASSIGNMENT MATERIAL 385
A
B
C
1 Direct material
$ 200,000
2 Direct manufacturing labor time for first boat
15,000 labor-hours
3 Direct manufacturing labor rate
$ 40 per direct manufacturing labor-hour
4 Variable manufacturing overhead cost
$ 25 per direct manufacturing labor-hour
5 Other manufacturing overhead
20% of direct manufacturing labor costs
6 Tooling costs a $280,000
7 Learning curve for manufacturing labor time per boat
90% cumulative average time b
8
9
a Tooling can be reused at no extra cost because all of its cost has been assigned to the first deployment boat.
10
11
ln 0.9 –0.105361
Using the formula (p. 359), for a 90% learning curve, b =
ln 2
=
0.693147
= –0.152004
12
1. Calculate predicted total costs of producing the six PT109s for the Navy. (Nautilus will keep the first
deployment boat assembled, costed at $1,575,000, as a demonstration model for potential customers.)
2. What is the dollar amount of the difference between (a) the predicted total costs for producing the six
PT109s in requirement 1, and (b) the predicted total costs for producing the six PT109s, assuming that
there is no learning curve for direct manufacturing labor? That is, for (b) assume a linear function for
units produced and direct manufacturing labor-hours.
10-37 Cost estimation, incremental unit-time learning model. Assume the same information for the
Nautilus Company as in Problem 10-36 with one exception. This exception is that Nautilus uses a 90% incremental
unit-time learning model as a basis for predicting direct manufacturing labor-hours in its assembling
operations. (A 90% learning curve means b = –0.152004.)
1. Prepare a prediction of the total costs for producing the six PT109s for the Navy.
2. If you solved requirement 1 of Problem 10-36, compare your cost prediction there with the one you
made here. Why are the predictions different? How should Nautilus decide which model it
should use?
10-38 Regression; choosing among models. Tilbert Toys (TT) makes the popular Floppin’ Freddy Frog and
Jumpin’ Jill Junebug dolls in batches. TT has recently adopted activity-based costing. TT incurs setup costs
for each batch of dolls that it produces. TT uses “number of setups” as the cost driver for setup costs.
TT has just hired Bebe Williams, an accountant. Bebe thinks that “number of setup-hours” might be
a better cost driver because the setup time for each product is different. Bebe collects the following data.
Required
Required
1
2
3
4
5
6
7
8
9
10
A
Month
1
2
3
4
5
6
7
8
9
B
Number of Setups
300
410
150
480
310
460
420
300
270
C
Number of Setup Hours
1,840
2,680
1,160
3,800
3,680
3,900
2,980
1,200
3,280
D
Setup Costs
$104,600
126,700
57,480
236,840
178,880
213,760
209,620
90,080
221,040