Davis Instruments has two manufacturing plants located in Atlanta, Georgia. Product demand varies considerably from month to month, causing Davis extreme difficulty in workforce scheduling. Recently Davis started hiring temporary workers supplied by WorkForce Unlimited, a company that specializes in providing temporary employees for firms in the greater Atlanta area. WorkForce Unlimited offered to provide temporary employees under three contract options that differ in terms of the length of employment and the cost. The three options are summarized:

Option

Length of Employment

Cost

1

One month

$2000

2

Two months

$4800

3

Three months

$7500

The longer contract periods are more expensive because WorkForce Unlimited experiences greater difficulty finding temporary workers who are willing to commit to longer work assignments.

Over the next six months, Davis projects the following needs for additional employees:

Month  
January

February

March

April

May

June

Employees Needed  
10

23

19

26

20

14

Each month, Davis can hire as many temporary employees as needed under each of the three options. For instance, if Davis hires five employees in January under Option 2, WorkForce Unlimited will supply Davis with five temporary workers who will work for two months: January and February. For these workers, Davis will have to pay 5($4800)=$24,000 . Because of some merger negotiations under way, Davis does not want to commit to any contractual obligations for temporary employees that extend beyond June.

Davis’s quality control program requires each temporary employee to receive training at the time of hire. The training program is required even if the person worked for Davis Instruments in the past. Davis estimates that the cost of training is $875 each time a temporary employee is hired. Thus, if a temporary employee is hired for one month, Davis will incur a training cost of $875, but will incur no additional training cost if the employee is on a two- or three-month contract.

Problem 4   Workforce Scheduling

1. Define the decision variables, objective function, and constraints.

Optimal Solution: Total Cost =

2.

3. With the lower training costs, the costs per employee for each option are as follows:

4.        

1. Periodic Inventory by Three Methods

   Dymac Appliances uses the periodic inventory system. Details regarding the inventory of appliances at January 1, purchases invoices during the next 12 months, and the inventory count at December 31 are summarized as follows:

   Purchases Invoices
   Model	Inventory, January 1		1st		2nd		3rd		Inventory Count, December 31
   A10	__		4 at	$ 39	4 at	$ 42	4 at	$ 45	5
   B15	8 at	$ 86	4 at	77	3 at	83	6 at	90	7
   E60	3 at	69	3 at	59	15 at	62	9 at	64	5
   G83	7 at	243	6 at	251	5 at	261	10 at	260	9
   J34	12 at	55	10 at	57	16 at	64	16 at	65	13
   M90	2 at	106	2 at	108	3 at	126	3 at	128	5
   Q70	5 at	153	4 at	163	4 at	168	7 at	173	8

   Required:

   1. Determine the cost of the inventory on December 31 by the The method of inventory costing based on the assumption that the costs of merchandise sold should be charged against revenue in the order in which the costs were incurred.first-in, first-out method.

   If the inventory of a particular model comprises one entire purchase plus a portion of another purchase acquired at a different unit cost, use a separate line for each purchase. If units are in inventory at two different costs, enter the units PURCHASED MOST RECENTLY first.

   Dymac Appliances Cost of the Inventory-FIFO Method December 31
   Model	Quantity		Unit Cost		Total Cost
   A10		$		$
   A10
   B15
   B15
   E60
   G83
   J34
   M90
   M90
   Q70
   Q70
   Total				$

   2. Determine the cost of the inventory on December 31 by the A method of inventory costing based on the assumption that the most recent merchandise inventory costs should be charged against revenue.last-in, first-out method.

   If the inventory of a particular model comprises one entire purchase plus a portion of another purchase acquired at a different unit cost, use a separate line for each purchase. If units are in inventory at two different costs, enter the OLDEST units first.

   Dymac Appliances Cost of the Inventory-LIFO Method December 31
   Model	Quantity		Unit Cost		Total Cost
   A10		$		$
   A10
   B15
   E60
   E60
   G83
   G83
   J34
   J34
   M90
   M90
   M90
   Q70
   Q70
   Total				$

   3. Determine the cost of the inventory on December 31 by the weighted average cost method.

   Dymac Appliances Cost of the Inventory-Weighted Average Method December 31
   Model	Quantity		Unit Cost		Total Cost
   A10		$		$
   B15
   E60
   G83
   J34
   M90
   Q70
   Total				$

   4.

   • FIFO
   • LIFO
   would be preferred for income tax purposes in periods of rising prices

Periodic Inventory by Three Methods

Dymac Appliances uses the periodic inventory system. Details regarding the inventory of appliances at November 1, 2015, purchases invoices during the next 12 months, and the inventory count at October 31, 2016, are summarized as follows:

Required:

1. Determine the cost of the inventory on October 31, 2016, by the The method of inventory costing based on the assumption that the costs of merchandise sold should be charged against revenue in the order in which the costs were incurred.first-in, first-out method.

If the inventory of a particular model comprises one entire purchase plus a portion of another purchase acquired at a different unit cost, use a separate line for each purchase. If units are in inventory at two different costs, enter the units PURCHASED MOST RECENTLY first.

2. Determine the cost of the inventory on October 31, 2016, by the A method of inventory costing based on the assumption that the most recent merchandise inventory costs should be charged against revenue.last-in, first-out method.

If the inventory of a particular model comprises one entire purchase plus a portion of another purchase acquired at a different unit cost, use a separate line for each purchase. If units are in inventory at two different costs, enter the OLDEST units first.

3. Determine the cost of the inventory on October 31, 2016, by the weighted average cost method.

Doede Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts--equipment depreciation and supervisory expense--to three activity cost pools--Machining, Order Filling, and Other--based on resource consumption. Data to perform these allocations appear below:

Overhead costs:

Distribution of Resource Consumption Across Activity Cost Pools:

In the second stage, Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products.

Activity:

Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins.

Sales and Direct Cost Data:

What is the overhead cost assigned to Product W1 under activity-based costing? (Round your intermediate calculations to 2 decimal places and your final answer to nearest whole dollar amount.)

Multiple Choice

• $5,475

• $22,400

• $7,827

• $2,352

Dodo Inc., uses activity-based costing to determine product margins. In the first stage, the activity-based costing system allocates two overhead accounts--equipment depreciation and supervisory expense--to three activity cost pools--Machining, Order Filling, and Other--based on resource consumption. Data pertinnent to perform these allocations appears below:

Overhead costs:

Distribution of Resource Consumption Across Activity Cost Pools:

In the second stage, Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products.

Activity:

Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins.

Sales and Direct Cost Data:

What is the overhead cost assigned to Product W1 under activity-based costing? (Round your intermediate calculations to 2 decimal places and your final answer to nearest whole dollar amount.)

The many identical residents of Whoville love drinking Zlurp. Each resident has the following willingness to pay for the tasty refreshment:

The cost of producing a bottle of Zlurp is $3.50, and the competitive suppliers sell it at this price. (The supply curve is horizontal.)

Each Whovillian will consume (HOW MANY) bottles and receive a consumer surplus of $?

Producing Zlurp creates pollution. Each bottle has an external cost of $1.

Taking this additional cost into account, total surplus per person in the allocation you previously determined decreases to.

Cindy Lou Who, one of the residents of Whoville, decides on her own to reduce her consumption of Zlurp by 1 bottle.

Cindy's consumer surplus (ignoring the cost of pollution she experiences) is now $?. Her decision INCREASES OR DECREASES total surplus in Whoville by $?

Mayor Grinch imposes a $1 tax on each bottle of Zlurp.

Consumption per person is now _   bottles. This yields a per-person consumer surplus of $? not including the cost of pollution, a per-person external cost of $?, and government revenue of $? per person. Total surplus per person is now $? as a result of this policy. (Hint: Total surplus is equal to consumer surplus minus the external cost of pollution plus government revenue.)

Based on your calculations, you WOULD OR WOULD NOT support the mayor's policy because it INCREASES OR DEACREASES welfare compared to before the tax.

Doede Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts--equipment depreciation and supervisory expense--to three activity cost pools--Machining, Order Filling, and Other--based on resource consumption. Data to perform these allocations appear below:

Distribution of Resource Consumption Across Activity Cost Pools:

In the second stage, Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products.

Activity:

Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins.

Sales and Direct Cost Data:

What is the overhead cost assigned to Product W1 under activity-based costing? (Round your intermediate calculations to 2 decimal places and your final answer to nearest whole dollar amount.)

Multiple Choice

• $10,862

• $46,760

• $16,150

• $5,288

Rondeau, Inc., manufactures and sells two products: Product V9 and Product M6. 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 $24.40 per DLH. The direct materials cost per unit for each product is given below:

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

Required:

Calculate the difference between the unit product costs under the traditional costing method and the activity-based costing system for each of the two products. (Round your intermediate calculations and final answers to 2 decimal places. Enter your answers as positive values.)

EXEL

This exercise illustrates some of the tradeoffs involved in determining the location and concentration of production.

A multinational corporation is considering three different production sites (P1, P2, P3) to manufacture a product that serves two markets M1 and M2, which have demands of 900 and 800 units respectively. The total volume of production equals the demand. In other words, the total production in all three sites should be 1,700 units. The maximum capacities for P1, P2, and P3 are 500, 500, and 1,000 units respectively (that means you have to use at least two production sites) and the question is how many units should the company manufacture in each location in order to minimize the cost?

Two elements have to be taken into account: the production cost and the transportation cost.

TOTAL COST = PRODUCTION COST + TRANSPORTATION COST

For the former, the economies of scale play an important role in determining the total cost of production: different ways of distributing the production among the three sites (the firm can also use two sites only) result in different production costs.

Once a certain distribution is considered, the transportation costs should also be calculated (in real life these costs are much more complex since they would include potential tariffs, customs clearance procedures, …): a production site could be very efficient from an economies of scale standpoint but far from the markets. The costs of shipping one unit of production from each production site to each market are shown in the table below: