Wormwood, Ltd., produces a variety of furniture products. The planning committee wants to pre- pare an aggregate plan for the next six months using the following information:

Subcontracting can handle a maximum of 10 units per month. Beginning inventory is zero. Develop a plan that minimizes total cost. No back orders are allowed. Regular capacity = Regular production.

1.  Because total capacity of regular and overtime is greater than the forecast, we don't need to use the subcontractor in this problem. True or false?

2.  To satisfy the requirement, not all over time will be used. True or false?

3. To minimize the total cost, we need to hold inventory by the end of which of following month(s)? Select all that apply. 1, 2, 3, 4, 5, and/or 6.

4.  To minimize the total cost, we need to use subcontractor in which of following month(s)? Select all that apply. 1, 2, 3, 4, 5, and/or 6.

5.  What is the minimized total cost for the plan?

The president of Hill Enterprises, Terri Hill, projects the firm’s aggregate demand requirements over the next 8 months as follows:

Dec 1,600 Jan. 1,400 May 2,200 Feb. 1,600 June 2,200 Mar. 1,800 July 1,800 Apr. 1,800 Aug. 1,800.

Her operations manager is considering a new plan, which begins in January with 200 units on hand. Stockout cost of lost sales is $100 per unit. Inventory holding cost is $20 per unit per month. Ignore any idle-time costs. The plan is called plan A. Plan A: Vary the workforce level to execute a “chase” strategy by producing the quantity demanded in the prior month. The December demand and rate of production are both 1,600 units per month. The cost of hiring additional workers is $5,000 per 100 units. The cost of laying off workers is $7,500 per 100 units. Evaluate this plan. PX Note: Both hiring and layoff costs are incurred in the month of the change. For example, going from 1,600 in January to 1,400 in February incurs a cost of layoff for 200 units in February.

If demand is more than production and there is no inventory, then you will have stockout for that month.

Total costs = $43,000

Total costs = $153,000

Total costs = $135,000

Total costs = $28,000

Total costs = $85,000

The consulting agency is working with the client on engineering plans. The client has 3 sanitation engineers that each can work 160 hours per month at a rate of $40 per hour. When the client needs more than 160 hours per month from a sanitation engineer, they get overtime pay of $60 per hour. The client does not allow their sanitation engineers to work more than 240 hours in a month. The treatment facility demand for sanitation engineering hours over the next 6 months is given.

The consulting agency has experienced sanitation engineers that work on a temporary contract with them as needed to support their client busy time periods, if needed, for $100 per hour. The client will not layoff anyone, but could however hire another sanitation engineer depending on needs.

Develop an aggregate plan for the next 6-months. Compute the cost of the plan using overtime and temporary engineers. Should the client hire another engineer?

Question 2 options:

Snavely, Inc., manufactures and sells two products: Product E1 and Product A7. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:

The direct labor rate is $21.10 per DLH. The direct materials cost per unit for each product is given below:

The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity:

The total overhead applied to Product E1 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.)

rev: 03_25_2018_QC_CS-119201

Multiple Choice

• $1,214,465

• $608,732

• $523,169

• $436,128

Fixed and Variable Cost Allocation

Kumar, Inc., evaluates managers of producing departments on their ability to control costs. In addition to the costs directly traceable to their departments, each production manager is held responsible for a share of the costs of a support center, the Human Resources (HR) Department. The total costs of HR are allocated on the basis of actual direct labor hours used. The total costs of HR and the actual direct labor hours worked by each producing department are as follows:

*$0.25 per direct labor hour plus $100,000.

When the capacity of the HR Department was originally established, the normal usage expected for each department was 18,000 direct labor hours. This usage is also the amount of activity planned for the two departments in Year 1 and Year 2.

Required:

1. Allocate the costs of the HR Department using the direct method and assuming that the purpose is product costing.

2. Allocate the costs of the HR Department using the direct method and assuming that the purpose is to evaluate performance.

A manager is attempting to put together an aggregate plan for the coming nine months. She has obtained a forecast of expected demand for the planning horizon. The plan must deal with highly seasonal demand; demand is relatively high in periods 3 and 4 and again in period 8, as can be seen from the following forecasts:

The department now has 20 full-time employees, each of whom can produce 10 units of output per period at a cost of $6 per unit. Inventory carrying cost is $5 per unit per period, and backlog cost is $10 per unit per period.

Prepare an aggregate plan that uses overtime ($9 per unit, maximum output 25 units per period) and inventory variation. The primary objective in this problem is to minimize backlogs to the extent possible without having any inventory remaining at the end of Period 9. The ending inventory in period 9 should be zero, and the limit on backlogs is 60 units per period. Note that Total output = Total regular output + Overtime quantity. Compute the total cost of your plan. Assume 20 full-time workers. (Omit the "$" sign in your response.)

Total cost           $

Consider a monopoly facing inverse demand function ?(?) = 12 − ?, where ? = ?1 + ?2 denotes the monopolist’s production across two plants, 1 and 2. Assume that total cost in plant 1 is given by ??1 (?1 ) = (5 + 4?1)?1, while that of plant 2 is ??2 (?2 ) = [5 + (4 + ?)?2]?2, where parameter ? ≥ 0 represents plant 2’s inefficiency to plant 1. When ? = 0, the total (and marginal) cost of both plants coincide; but when ? > 0, plant 2 has a higher total and marginal cost than plant 1. a) Write down the monopolist’s joint profit maximization problem ? = ?1 + ?2. b) Find the optimal production in each plant. c) How does total optimal production change in the inefficiency of plant 2, ?? Answer this question by finding ?? ??. What is the optimal production in each plant if ? = 0?

Acme Company Balance Sheet As of January 5, 2018 (amounts in thousands) Cash 14,300 Accounts Payable 1,900 Accounts Receivable 4,100 Debt 3,200 Inventory 5,800 Other Liabilities 4,000 Property Plant & Equipment 14,800 Total Liabilities 9,100 Other Assets 700 Paid-In Capital 7,700 Retained Earnings 22,900 Total Equity 30,600 Total Assets 39,700 Total Liabilities & Equity 39,700 Update the balance sheet above to reflect the transactions below, which occur on January 6, 2018 1. Sell product for $20,000 with historical cost of $16,000 2. Sell product for $30,000 with historical cost of $24,000 3. Sell product for $35,000 with historical cost of $28,000 What is the final amount in Retained Earnings? Please specify your answer in the same units as the balance sheet.

Beckley Corporation has provided the following data from its activity based costing accounting systems:

Indirect factory wages $16,000

Factor Equipment Depreciation $193,000

Distribution of resource Consumption across activity cost pools:

Indirect factory wages customer orders(48%) product processing (47%) other (5%) total(100%)

Factory equipment depreciation customer orders(61%) product processing (25%) other(14%) total(100%)

The other activity cost pool consists of the costs of idle capacity and organization sustaining costs that are not assigned to products

Required:

a) determine the total amount of indirect factory wages and factory equipment depreciation costs that would be allocated to the Product Processing activity cost pool.

b) determine the total amount of indirect factory wages and factory equipment depreciation costs that would NOT be assigned to products.