Related questions with answers

Name four approaches to estimating a cost function.

The DJ Corporation makes custom specified wire harnesses for the trucking industry only upon receiving firm orders from its customers. DJ has recently purchased a new machine to make two types of wire harnesses, one for Peterbilt and the other for Kenworth. The annual capacity of the new machine is 5,000 hours. The following information is available for next year:

\begin{matrix} \text{Selling Price per Order If Average Manufacturing Cycle Time per Order Is } & \text{} & \text{} & \text{} & \text{} & \text{} & \text{}\\ \text{Customer} & \text{Annual Average Number of Orders} & \text{Manufacturing Time Required} & \text{Less Than 200 Hours} & \text{More Than 200 Hours} & \text{Variable Cost per Order} & \text{Inventory Carrying Cost per Order per Hour}\\ \text{Peterbilt} & \text{100} & \text{40 hours} & \text{\$14,000} & \text{\$13,400} & \text{\$9,000} & \text{\$0.50}\\ \text{Kenworth} & \text{10} & \text{50 hours} & \text{12,500} & \text{1,960} & \text{8,000} & \text{0.45}\\ \end{matrix}

Calculate the average manufacturing cycle times per order (a) if DJ manufactures only Peterbilt and (b) if DJ both manufactures Peterbilt and Kenworth. 2. Even though Kenworth has a positive contribution margin, DJ's managers are evaluating whether DJ should (a) make and sell only Peterbilt or (b) make and sell both Peterbilt and Kenworth. Which alternative will maximize DJ's operating income? Show your calculations. 3. What other factors should DJ consider in choosing between the alternatives in requirement 2?

Classical Glasses operates a kiosk at the local mall, selling sunglasses for $30 each. Classical Glasses currently pays$1,000 a month to rent the space and pays two full-time employees to each work 160 hours a month at $10 per hour. The store shares a manager with a neighboring kiosk and pays 50% of the manager’s annual salary of$60,000 and benefits of $12,000. The wholesale cost of the sunglasses to the company is$10 a pair. Required: 1. How many sunglasses does Classical Glasses need to sell each month to break even? 2. If Classical Glasses wants to earn an operating income of $5,300 per month, how many sunglasses does the store need to sell? 3. If the store’s hourly employees agreed to a 15% sales-commission-only pay structure, instead of their hourly pay, how many sunglasses would Classical Glasses need to sell to earn an operating income of$5,300? 4. Assume Classical Glasses pays its employees hourly under the original pay structure, but is able to pay the mall 10% of its monthly revenue instead of monthly rent. At what sales levels would Classical Glasses prefer to pay a fixed amount of monthly rent, and at what sales levels would it prefer to pay 10% of its monthly revenue as rent.

\begin{matrix} \text{ } & \text{Standard Job} & \text{Special Job} & \text{Total} & \text{Cause-and-Effect Relationship Between Allocation Base and Activity Cost}\\ \text{Number of printing jobs} & \text{400} & \text{200} & \text{ } & \text{ }\\ \text{Price per job} & \text{\$ 600} & \text{\$ 750}\\ \text{Cost of supplies per job} & \text{\$ 100} & \text{\$ 125}\\ \text{Direct labor costs per job} & \text{\$ 90} & \text{\$ 100}\\ \text{Printing machine-hours per job} & \text{ } & \text{ } & \text{ \$ 75.000} & \text{Indirect costs of operating printing machines increase with printing machine-hours}\\ \text{Setup-hours per job} & \text{4} & \text{7} & \text{ } & \text{ }\\ \text{Setup costs} & \text{ } & \text{ } & \text{\$ 45.00} & \text{Indirect setup costs increase with setup-hours}\\ \text{Total number of purchase orders } & \text{400} & \text{500}\\ \text{Design costs} & \text{\$ 4.000} & \text{\$ 16.000} & \text{\$ 20.000} & \text{Design costs are allocated to standard and special jobs based on a special study of the design department}\\ \text{Marketing costs as a percentage of revenues} & \text{5 \\\%} & \text{5 \\\%} & \text{\$ 19.500}\\ \end{matrix}

. 1. Calculate the cost of a standard job and a special job under the simple costing system. 2. Calculate the cost of a standard job and a special job under the activity-based costing system. 3. Compare the costs of a standard job and a special job in requirements 1 and 2. Why do the simple and activity-based costing systems differ in the cost of a standard job and a special job? 4. How might Speediprint use the new cost information from its activity-based costing system to better manage its business?