Question

1. Value-Stream Costing Objective

   During the week of June 12, Harrison Manufacturing produced and shipped 18,000 units of its aluminum wheels: 5,000 units of Model A and 13,000 units of Model B. The following costs were incurred:

   	Materials		Salaries/ Wages		Machining		Other		Total Cost
   Order processing			$19,000						$19,000
   Production planning			199,800						199,800
   Purchasing			25,200						25,200
   Stamping	$355,000		35,500		$37,800		$19,600		447,900
   Welding	150,000		40,000		40,000		12,000		242,000
   Cladding	470,000								470,000
   Testing			10,000						10,000
   Packaging and shipping			9,000						9,000
   Invoicing			13,000						13,000
   Total	$975,000		$351,500		$77,800		$31,600		$1,435,900

   Required:

   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. Round your answer to the nearest dollar amount.
   $ per unit

   2. Calculate the unit cost for Models A and B. Round your answers to the nearest dollar amount.

   	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. Round your answers to the nearest dollar amount.

   	Unit Cost
   Model A	$
   Model B	$

   Calculate the total unit cost for Models A and B. Round your interim calculations and final answers to the nearest dollar amount.

   	Unit Cost
   Model A	$
   Model B	$

Answer 1

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. Round your answer to the nearest dollar amount.

In this case we have to derive unit cost by following method -

Unit Cost = Total Cost / Total Units

= $ 1,435,900 / 18,000

= $ 79.77

Hence total unit cost is $ 79.77.

2. Calculate the unit cost for Models A and B. Round your answers to the nearest dollar amount.

We need to calculate serperate cost for each model in a following way =

Model A = Combined Unit Cost x Model A Units / Combined Units

= $ 79.77 x 5000 / 18000

= $ 22.16

Model B = Combined Unit Cost x Model B Units / Combined Units

= $ 79.77 x 13000 / 18000

= $ 57.61

	Unit Cost
Model A	$    22.16
Model B	$    57.61

3. What if Model A is responsible for 40 percent of the materials cost? Calculate the unit materials cost for Models A and B. Round your answers to the nearest dollar amount.

Calculation of unit material cost for Model A

Material cost of Model A = Total Material Cost x 40% / Unit Material A

= $ 975,000 x 40% / 5000

= $ 78

Calculation of unit material cost for Model B

Material cost of Model B = Total Material Cost x 60% / Unit Material B

= $ 975,000 x 60% / 13000

= $ 45

	Unit Cost
Model A	$    78.00
Model B	$    45.00

4. Calculate the total unit cost for Models A and B. Round your interim calculations and final answers to the nearest dollar amount.

Computation of total unit cost for Model A =

Total Unit Cost for Model A = Unit Cost x Model A Units

= $ 79.77 x 5,000

= $ 398,861

Total Unit Cost for Model B = Unit Cost x Model B Units

= $ 79.77 x 13,000

= $ 1,037,039

	Unit Cost
Model A	$     398,861
Model B	$ 1,037,039
Total	$ 1,435,900