Saturday, May 23, 2020
Costs and Direct Labor - 748 Words
1. What is the competitive environment of ETO? ETO, Electronic Testing Operations, provides centralized testing for electronic components such as integrated circuits. Because low-technology outside laboratories were often cheaper, expecially on larger lots, due to no engineering part, ETO has to shift from simple inspection services to more technically sophisticated services. 2. Describe the existing cost system and calculate the cost of the 5 components in the case. What is wrong with the existing cost system? The existing cost system measures direct labour and overhead. Overhead is grouped into a single cost pool that includes overhead costs associated with each of the testing rooms as well as the engineering overhead costs†¦show more content†¦Direct Labor Overhead 1 Machine hours (h) Overhead 2 Total cost (direct labor) (20%) (machine hours) ($80/h) ICA $917 $183 18,5 $1.480 $2.580 ICB $2.051 $410 40 $3.200 $5.661 Capacitor $1.094 $219 7,5 $600 $1.913 Amplifier $525 $105 5 $400 $1.030 Diode $519 $104 12 $960 $1.583 4. Describe the cost system proposed by the consultant and calculate the cost of the 5 components in the case. The cost system proposed by the consultant consists of a three-allocation-pool system utilizing separate cost centers for each test room and a common technical and administrative pool. Overhead costs are allocated on a machine-hour basis, technical and administrative costs are charged per direct labor dollar. Direct Labor Overhead 1 Machine hours Machine hours Overhead 2 Overhead 3 Total cost (direct labor) (20%) Main room (h) Mechanical room (h) (Main room) (Mech. room) ICA $917 $183 8,5 10,0 $538 $1.126 $2.765 ICB $2.051 $410 14,0 26,0 $887 $2.928 $6.276 Capacitor $1.094 $219 3,0 4,5 $190 $507 $2.010 Amplifier $525 $105 4,0 1,0 $253 $113 $996 Diode $519 $104 7,0 5,0 $443 $563 $1.629 The machine hour rate for the main room was calculated by dividing the test room overhead costs through the machine hours of the main test room: $ 2.103.116 / 33201h = $ 63,34/h. We did the same for the mechanical room. $ 1.926.263 / 17103h = $ 112,63/h. The calculated machine hour rate number was then multiplied with the used machineShow MoreRelatedCosts and Direct Labor Cost1308 Words  | 6 Pagesfollowing data have been recorded for recently completed Job 501 on its job cost sheet. Direct materials cost was $3,067. A total of 30 direct labor-hours and 104 machine-hours were worked on the job. The direct labor wage rate is $12 per labor-hour. The company applies manufacturing overhead on the basis of machinehours. The predetermined overhead rate is $11 per machine-hour. The total cost for the job on its job cost sheet would be: A. $4,571 B. $3,757 C. $3,090 D. $3,427 Applied manufacturingRead MoreQuiz 1 solutions1331 Words  | 6 Pagesï » ¿The following costs were incurred in September: Direct materials $42,700 Direct labor $29,400 Manufacturing overhead $27,300 Selling expenses $23,600 Administrative expenses $33,700 Conversion costs during the month totaled: → $56,700 $70,000 $72,100 $156,700 Conversion cost = Direct labor + Manufacturing overhead = $29,400 + $27,300 In September direct labor was 25% of conversion cost. 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Case Study951 Words  | 4 Pagesthe existing cost system and explain why it failed The current cost system is based on two components: a direct and indirect cost measurement. There are only two types of cost: direct labor and burden. Burden is grouped into a single cost pool and represents the cost of both testing rooms, engineering burden costs (software and tooling development), plus the administrative costs of the division. Burden was then calculated for each lot, with a burden rate of 145% The lot’s total cost is the sumRead MoreSeligram Case Study1130 Words  | 5 Pagesin chapter 7 initially,††¦ cost systems designs were simple†¦Ã¢â‚¬Å"(Brewster et.al, p. 236). The goal of the allocation process is to assign overhead in a manner that most appropriately reflects the cause /effect relationship of incurred costs. These cost systems were based on belief that there was a high correlation between direct labor hours and units produced (Brewster et. al, p. 237). ETO’s current cost system only factors in two of their cost components;†direct labor and burden†(Seligram, 1993Read MoreManagerial Accounting1054 Words  | 5 Pages400 Inventory 6/30/14 18,600 Cash 32,000 Direct Labor 139,250 Indirect Labor 24,460 Account Receivable 27,000 Instructions Prepare a cost of goods manufactured schedule (Assume all raw materials used were direct material) 1) Prepare an income statement through gross profit. 2) Prepare the current assets section of the balance sheet at June 30, 2014. CHAPTER 2 (Job Order Costing) P2-4A Agassi Company uses a job order cost system in each of its three manufacturing departments
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