Question

Value-Stream Costing Objective During the week of June 12, Harrison Manufacturing produced and shipped 16,000 units of its aluminum wheels: 3,400 units of Model A and 12,600 units of Model B. The following costs were incurred: Materials        Salaries/ Wages        Machining        Other        Total Cost Order processing        $19,400                      $19,400 Production planning        34,800                      34,800 Purchasing        23,400                      23,400 Stamping $380,000        38,000        $36,200        $18,000        472,200 Welding 160,000        20,000        16,000        12,000        208,000 Cladding 65,000                             65,000 Testing        10,000                      10,000 Packaging and shipping        10,000                      10,000 Invoicing        14,200                      14,200   Total $605,000        $169,800        $52,200        $30,000        $857,000 Required: Note: Round ALL interim calculations to two decimal places. Uses these values in subsequent computations. 1. Assume initially that the value-stream costs and total units shipped apply only to one model (a single-product value stream). Calculate the unit cost. Unit cost is $ per unit 2. Calculate the unit cost for Models A and B. Unit Cost Model A $ Model B $ 3. What if Model A is responsible for 40 percent of the materials cost? Calculate the unit materials cost for Models A and B. Unit Cost Model A $ Model B $ Calculate the total unit cost for Models A and B. Unit Cost Model A $ Model B $

Answer 1

Part- A & B

Unit Cost := Total Cost / Total Unit

= 857000/(3400+12600) =53.5625 or 53.56

Eac Model A & B will be the same cost $53.56

PART B

Total cost of A= Total cost *   A units /Total Units

= 857000*3400/16000 = 182113

Unit cost = Total cost A / A units=182113/3400 =53.56

Total cost of B= Total cost *   B units /Total Units

= 857000*12600/16000 = 674888

Unit cost = Total cost B / Bunits=674888/12600 =53.56

Part-C

Model A ( Unit Material Cost )= Total Cost/ Total Unit

=(605000*40%)/3400

=242000/3400=71.1765 or 71.18

Model B ( Unit Material Cost )= Total Cost/ Total Unit

(605000*60%)/12600= 363000/12600

=28.8095 or 28.81

Computation of Conversion Cost

Unit Cost =Total Cost/ Total Unit

=(857000-605000)/(3400+12600)= $252000/16000

=15.75

Computation of Total Unit cost
Particular	Material Cost	Conversion Cost	Total
Model A	$71.18	$15.75	$86.93
Model B	$28.81	$15.75	$44.56