The following scenario relates to questions 1 – 5.

Scenario

Brick by Brick (BBB) is a building business that provides a range of building services to the public. Recently it has been asked to quote for garage conversions (GC) and extensions to properties (EX) and has found that it is winning fewer GC contracts than expected. In addition, BBB also produces and sells different types of brick to the construction industry. The three types of brick produced are clay, concrete and reclaimed bricks.

BBB has a policy to price all jobs at budgeted total cost plus 50%. Overheads are currently absorbed on a labour hour basis. BBB thinks that a switch to activity based costing (ABC) to absorb overheads would reduce the costs associated with GC and hence make them more competitive.

You are provided with the following data:

A typical GC takes 300 labour hours to complete. A GC requires only one site visit by a supervisor and needs only one planning document to be raised. An EX requires six site visits and five planning documents.

REQUIREMENT

Which of the following statements about Brick by Brick and the use of ABC is TRUE?

The following scenario relates to questions 1 – 5.

Scenario

Brick by Brick (BBB) is a building business that provides a range of building services to the public. Recently it has been asked to quote for garage conversions (GC) and extensions to properties (EX) and has found that it is winning fewer GC contracts than expected. In addition, BBB also produces and sells different types of brick to the construction industry. The three types of brick produced are clay, concrete and reclaimed bricks.

BBB has a policy to price all jobs at budgeted total cost plus 50%. Overheads are currently absorbed on a labour hour basis. BBB thinks that a switch to activity based costing (ABC) to absorb overheads would reduce the costs associated with GC and hence make them more competitive.

You are provided with the following data:

A typical GC takes 300 labour hours to complete. A GC requires only one site visit by a supervisor and needs only one planning document to be raised. An EX requires six site visits and five planning documents.

REQUIREMENT

What are the total overheads assigned to a GC using ABC principles in respect of supervisor costs?

The following scenario relates to questions 1 – 5.

Scenario

Brick by Brick (BBB) is a building business that provides a range of building services to the public. Recently it has been asked to quote for garage conversions (GC) and extensions to properties (EX) and has found that it is winning fewer GC contracts than expected. In addition, BBB also produces and sells different types of brick to the construction industry. The three types of brick produced are clay, concrete and reclaimed bricks.

BBB has a policy to price all jobs at budgeted total cost plus 50%. Overheads are currently absorbed on a labour hour basis. BBB thinks that a switch to activity based costing (ABC) to absorb overheads would reduce the costs associated with GC and hence make them more competitive.

You are provided with the following data:

A typical GC takes 300 labour hours to complete. A GC requires only one site visit by a supervisor and needs only one planning document to be raised. An EX requires six site visits and five planning documents.

REQUIREMENT

The absorption cost and ABC cost per service have now been correctly calculated as follows:

Which of the following statements is/are FALSE?

1. Changing to a system of ABC costing should lead to a more competitive price being charged for the GC.
2. Using ABC would cause total overhead costs to increase.

The following scenario relates to questions 1 – 5.

Scenario

Brick by Brick (BBB) is a building business that provides a range of building services to the public. Recently it has been asked to quote for garage conversions (GC) and extensions to properties (EX) and has found that it is winning fewer GC contracts than expected. In addition, BBB also produces and sells different types of brick to the construction industry. The three types of brick produced are clay, concrete and reclaimed bricks.

BBB has a policy to price all jobs at budgeted total cost plus 50%. Overheads are currently absorbed on a labour hour basis. BBB thinks that a switch to activity based costing (ABC) to absorb overheads would reduce the costs associated with GC and hence make them more competitive.

You are provided with the following data:

A typical GC takes 300 labour hours to complete. A GC requires only one site visit by a supervisor and needs only one planning document to be raised. An EX requires six site visits and five planning documents.

REQUIREMENT

What are the total overheads assigned to an EX using ABC principles in respect of planning costs?

The following scenario relates to questions 1 – 5.

Scenario

Brick by Brick (BBB) is a building business that provides a range of building services to the public. Recently it has been asked to quote for garage conversions (GC) and extensions to properties (EX) and has found that it is winning fewer GC contracts than expected. In addition, BBB also produces and sells different types of brick to the construction industry. The three types of brick produced are clay, concrete and reclaimed bricks.

BBB has a policy to price all jobs at budgeted total cost plus 50%. Overheads are currently absorbed on a labour hour basis. BBB thinks that a switch to activity based costing (ABC) to absorb overheads would reduce the costs associated with GC and hence make them more competitive.

You are provided with the following data:

A typical GC takes 300 labour hours to complete. A GC requires only one site visit by a supervisor and needs only one planning document to be raised. An EX requires six site visits and five planning documents.

REQUIREMENT

What are the total overheads assigned to a GC using labour hours to absorb the overheads?

The following scenario relates to questions 1 – 5.

Scenario

Jola Publishing Co publishes two forms of book.

The company publishes a children's book (CB), which is sold in large quantities to government-controlled schools. The book is produced in four large production runs. The second book is a comprehensive technical journal (TJ). It is produced in monthly production runs, 12 times a year.

The directors are concerned about the performance of the two books and are wondering what the impact would be of a switch to an activity based costing (ABC) approach to accounting for overheads. They currently use absorption costing, based on number of books produced for all overhead calculations. Overheads amount to $2,880,000.

The CB will be inspected on 180 occasions next year, whereas the TJ will be inspected just 20 times.

Machine time per unit is six minutes for the CB and ten minutes for the TJ.

Jola Publishing will produce its annual output of 1,000,000 CBs in four production runs and approximately 10,000 TJs per month in each of 12 production runs.

REQUIREMENT

What is the total activity based allocation of quality control overheads for production of the TJ?

The following scenario relates to questions 1 – 5.

Scenario

Jola Publishing Co publishes two forms of book.

The company publishes a children's book (CB), which is sold in large quantities to government-controlled schools. The book is produced in four large production runs. The second book is a comprehensive technical journal (TJ). It is produced in monthly production runs, 12 times a year.

The directors are concerned about the performance of the two books and are wondering what the impact would be of a switch to an activity based costing (ABC) approach to accounting for overheads. They currently use absorption costing, based on number of books produced for all overhead calculations. Overheads amount to $2,880,000.

The CB will be inspected on 180 occasions next year, whereas the TJ will be inspected just 20 times.

Machine time per unit is six minutes for the CB and ten minutes for the TJ.

Jola Publishing will produce its annual output of 1,000,000 CBs in four production runs and approximately 10,000 TJs per month in each of 12 production runs.

REQUIREMENT

What is the overhead cost per unit of the CB using the current system of absorption costing? (to two decimal place)

The following scenario relates to questions 1 – 5.

Scenario

Jola Publishing Co publishes two forms of book.

The company publishes a children's book (CB), which is sold in large quantities to government-controlled schools. The book is produced in four large production runs. The second book is a comprehensive technical journal (TJ). It is produced in monthly production runs, 12 times a year.

The directors are concerned about the performance of the two books and are wondering what the impact would be of a switch to an activity based costing (ABC) approach to accounting for overheads. They currently use absorption costing, based on number of books produced for all overhead calculations. Overheads amount to $2,880,000.

The CB will be inspected on 180 occasions next year, whereas the TJ will be inspected just 20 times.

Machine time per unit is six minutes for the CB and ten minutes for the TJ.

Jola Publishing will produce its annual output of 1,000,000 CBs in four production runs and approximately 10,000 TJs per month in each of 12 production runs.

REQUIREMENT

If Jola Publishing Co decides to introduce an ABC costing system, which of the following is an advantage of ABC that they can expect to benefit from?

The following scenario relates to questions 1 – 5.

Scenario

Jola Publishing Co publishes two forms of book.

The company publishes a children's book (CB), which is sold in large quantities to government-controlled schools. The book is produced in four large production runs. The second book is a comprehensive technical journal (TJ). It is produced in monthly production runs, 12 times a year.

The directors are concerned about the performance of the two books and are wondering what the impact would be of a switch to an activity based costing (ABC) approach to accounting for overheads. They currently use absorption costing, based on number of books produced for all overhead calculations. Overheads amount to $2,880,000.

The CB will be inspected on 180 occasions next year, whereas the TJ will be inspected just 20 times.

Machine time per unit is six minutes for the CB and ten minutes for the TJ.

Jola Publishing will produce its annual output of 1,000,000 CBs in four production runs and approximately 10,000 TJs per month in each of 12 production runs.

REQUIREMENT

Jola Publishing Co has decided to adopt ABC. Management has put together a list of steps.

The following is the List of the steps:

1. Calculate the overhead cost per unit of CB and TJ.
2. Calculate the absorption rate for each 'cost driver'.
3. Determine what causes the cost of each activity – the 'cost driver'.
4. Identify major activities within each department which creates cost.
5. Create a cost centre/cost pool for each activity – 'the activity cost pool'.

What is the correct order of the steps in ABC in which they should be carried out?

The following scenario relates to questions 1 – 5.

Scenario

Jola Publishing Co publishes two forms of book.

The company publishes a children's book (CB), which is sold in large quantities to government-controlled schools. The book is produced in four large production runs. The second book is a comprehensive technical journal (TJ). It is produced in monthly production runs, 12 times a year.

The directors are concerned about the performance of the two books and are wondering what the impact would be of a switch to an activity based costing (ABC) approach to accounting for overheads. They currently use absorption costing, based on number of books produced for all overhead calculations. Overheads amount to $2,880,000.

The CB will be inspected on 180 occasions next year, whereas the TJ will be inspected just 20 times.

Machine time per unit is six minutes for the CB and ten minutes for the TJ.

Jola Publishing will produce its annual output of 1,000,000 CBs in four production runs and approximately 10,000 TJs per month in each of 12 production runs.

REQUIREMENT

The overheads involved have been analysed as follows:

What is the total activity based allocation of production overheads for production of the CB?

The following scenario relates to questions 1 – 5.

Scenario

Corrie produces three products, X, Y and Z. The capacity of Corrie's plant is restricted by process alpha. Process alpha is expected to be operational for eight hours per day and can produce 1,200 units of X per hour, 1,500 units of Y per hour and 600 units of Z per hour.

Selling prices and material costs for each product are as follows.

Conversion costs are $720,000 per day.

REQUIREMENT

A change in factory cost arose, giving a new figure for conversion costs per factory hour of $80,000.

What is the revised throughput accounting (TPAR) ratio for each of the following product?

X _______ ?

Y _______ ?

Z _______ ?

The following scenario relates to questions 1 – 5.

Scenario

Corrie produces three products, X, Y and Z. The capacity of Corrie's plant is restricted by process alpha. Process alpha is expected to be operational for eight hours per day and can produce 1,200 units of X per hour, 1,500 units of Y per hour and 600 units of Z per hour.

Selling prices and material costs for each product are as follows.

Conversion costs are $720,000 per day.

REQUIREMENT

What are the conversion costs per factory hour?

$ _______

The following scenario relates to questions 1 – 5.

Scenario

Corrie produces three products, X, Y and Z. The capacity of Corrie's plant is restricted by process alpha. Process alpha is expected to be operational for eight hours per day and can produce 1,200 units of X per hour, 1,500 units of Y per hour and 600 units of Z per hour.

Selling prices and material costs for each product are as follows.

Conversion costs are $720,000 per day.

REQUIREMENT

Which TWO of the following statements about using TA are True?

The following scenario relates to questions 1 – 5.

Scenario

Corrie produces three products, X, Y and Z. The capacity of Corrie's plant is restricted by process alpha. Process alpha is expected to be operational for eight hours per day and can produce 1,200 units of X per hour, 1,500 units of Y per hour and 600 units of Z per hour.

Selling prices and material costs for each product are as follows.

Conversion costs are $720,000 per day.

REQUIREMENT

What is the efficiency of the bottleneck process given the output achieved is 6,000 units of X, 4,500 units of Y and 1,200 units of Z?

_____ %

The following scenario relates to questions 1 – 5.

Scenario

Corrie produces three products, X, Y and Z. The capacity of Corrie's plant is restricted by process alpha. Process alpha is expected to be operational for eight hours per day and can produce 1,200 units of X per hour, 1,500 units of Y per hour and 600 units of Z per hour.

Selling prices and material costs for each product are as follows.

Conversion costs are $720,000 per day.

REQUIREMENT

What is the profit per day if daily output achieved is 6,000 units of X, 4,500 units of Y and 1,200 units of Z?
$ _______

The following scenario relates to questions 1 – 6.

Scenario

A Co makes two products, B1 and B2. Its machines can only work on one product at a time. The two products are worked on in two departments by differing grades of labour. The labour requirements for the two products are as follows:

There is currently a shortage of labour and the maximum times available each day in Departments 1 and 2 are 480 minutes and 840 minutes, respectively. The bottleneck or limiting factor is labour in Department 1. The current selling prices and costs for the two products are shown below:

As part of the budget-setting process, A Co needs to know the optimum output levels. All output is sold.

REQUIREMENT

What is the throughput per minute of bottleneck resource of B2 (to two decimal places)?

The following scenario relates to questions 1 – 6.

Scenario

A Co makes two products, B1 and B2. Its machines can only work on one product at a time. The two products are worked on in two departments by differing grades of labour. The labour requirements for the two products are as follows:

There is currently a shortage of labour and the maximum times available each day in Departments 1 and 2 are 480 minutes and 840 minutes, respectively. The bottleneck or limiting factor is labour in Department 1. The current selling prices and costs for the two products are shown below:

As part of the budget-setting process, A Co needs to know the optimum output levels. All output is sold.

REQUIREMENT

What is the maximum number of units Product B2 could produced each day?

The following scenario relates to questions 1 – 6.

Scenario

A Co makes two products, B1 and B2. Its machines can only work on one product at a time. The two products are worked on in two departments by differing grades of labour. The labour requirements for the two products are as follows:

There is currently a shortage of labour and the maximum times available each day in Departments 1 and 2 are 480 minutes and 840 minutes, respectively. The bottleneck or limiting factor is labour in Department 1. The current selling prices and costs for the two products are shown below:

As part of the budget-setting process, A Co needs to know the optimum output levels. All output is sold.

REQUIREMENT

What is the maximum number of units Product B1 could produced each day?

The following scenario relates to questions 1 – 6.

Scenario

A Co makes two products, B1 and B2. Its machines can only work on one product at a time. The two products are worked on in two departments by differing grades of labour. The labour requirements for the two products are as follows:

There is currently a shortage of labour and the maximum times available each day in Departments 1 and 2 are 480 minutes and 840 minutes, respectively. The bottleneck or limiting factor is labour in Department 1. The current selling prices and costs for the two products are shown below:

As part of the budget-setting process, A Co needs to know the optimum output levels. All output is sold.

REQUIREMENT

The following is the List of the steps:

1. Subordinate everything else to the decisions made about exploiting the bottlenecks.
2. Elevate the system's bottlenecks.
3. Identify A Co's bottlenecks.
4. Decide how to exploit the system's bottlenecks.

If A Co decides to apply the theory of constraints, What should be the correct order of the steps in which they should be carried out?

The following scenario relates to questions 1 – 6.

Scenario

A Co makes two products, B1 and B2. Its machines can only work on one product at a time. The two products are worked on in two departments by differing grades of labour. The labour requirements for the two products are as follows:

There is currently a shortage of labour and the maximum times available each day in Departments 1 and 2 are 480 minutes and 840 minutes, respectively. The bottleneck or limiting factor is labour in Department 1. The current selling prices and costs for the two products are shown below:

As part of the budget-setting process, A Co needs to know the optimum output levels. All output is sold.

REQUIREMENT

A Co needs to decide whether to base its decisions about optimum levels of production using a throughput accounting approach, or a limiting factor approach.

Which of the following is an example of an advantage of choosing a throughput accounting approach?

The following scenario relates to questions 1 – 6.

Scenario

A Co makes two products, B1 and B2. Its machines can only work on one product at a time. The two products are worked on in two departments by differing grades of labour. The labour requirements for the two products are as follows:

There is currently a shortage of labour and the maximum times available each day in Departments 1 and 2 are 480 minutes and 840 minutes, respectively. The bottleneck or limiting factor is labour in Department 1. The current selling prices and costs for the two products are shown below:

As part of the budget-setting process, A Co needs to know the optimum output levels. All output is sold.

REQUIREMENT

Using traditional contribution analysis, what is the contribution per unit of limiting factor of B1 (to two decimal places)?

$ ______

The following scenario relates to questions 1 – 5.

Scenario

Cam Co manufactures webcams, devices which can provide live video and audio streams via personal computers. It has recently been suffering from liquidity problems and hopes that these will be eased by the launch of its new webcam, which has revolutionary audio and video quality.

The webcam is expected to have a product life cycle of two years. Market research has already been carried out to establish a target selling price and projected lifetime sales volumes for the product. Cost estimates have also been prepared, based on the current proposed product specification. Cam Co uses life cycle costing to work out the target costs for its products. You are provided with the following relevant information for the webcam:

Note. Estimated lifetime cost per unit:

The following information has been identified as relevant:

1. Direct material cost: all of the parts currently proposed for the webcam are bespoke parts. However, most of these can actually be replaced with standard parts costing 55% However, three of the bespoke parts, which currently account for 20% of the estimated direct material cost, cannot be replaced, although an alternative supplier charging 10% less has been sourced for these parts.
2. Direct labour cost: the webcam uses 45 minutes of direct labour, which costs $34.67 per hour. The use of more standard parts, however, will mean that while the first unit would still be expected to take 45 minutes, there will now be an expected rate of learning of 90% (where 'b' = – 0.152). This will end after the first 100 units have been completed.

REQUIREMENT

What is the average direct labour cost per unit in light of the new information in point (2)?

The following scenario relates to questions 1 – 5.

Scenario

Cam Co manufactures webcams, devices which can provide live video and audio streams via personal computers. It has recently been suffering from liquidity problems and hopes that these will be eased by the launch of its new webcam, which has revolutionary audio and video quality.

The webcam is expected to have a product life cycle of two years. Market research has already been carried out to establish a target selling price and projected lifetime sales volumes for the product. Cost estimates have also been prepared, based on the current proposed product specification. Cam Co uses life cycle costing to work out the target costs for its products. You are provided with the following relevant information for the webcam:

Note. Estimated lifetime cost per unit:

The following information has been identified as relevant:

1. Direct material cost: all of the parts currently proposed for the webcam are bespoke parts. However, most of these can actually be replaced with standard parts costing 55% However, three of the bespoke parts, which currently account for 20% of the estimated direct material cost, cannot be replaced, although an alternative supplier charging 10% less has been sourced for these parts.
2. Direct labour cost: the webcam uses 45 minutes of direct labour, which costs $34.67 per hour. The use of more standard parts, however, will mean that while the first unit would still be expected to take 45 minutes, there will now be an expected rate of learning of 90% (where 'b' = – 0.152). This will end after the first 100 units have been completed.

REQUIREMENT

Which of the following in the drop down list represents a possible method for closing the target cost gap for the webcam?

The following scenario relates to questions 1 – 5.

Scenario

Cam Co manufactures webcams, devices which can provide live video and audio streams via personal computers. It has recently been suffering from liquidity problems and hopes that these will be eased by the launch of its new webcam, which has revolutionary audio and video quality.

The webcam is expected to have a product life cycle of two years. Market research has already been carried out to establish a target selling price and projected lifetime sales volumes for the product. Cost estimates have also been prepared, based on the current proposed product specification. Cam Co uses life cycle costing to work out the target costs for its products. You are provided with the following relevant information for the webcam:

Note. Estimated lifetime cost per unit:

The following information has been identified as relevant:

1. Direct material cost: all of the parts currently proposed for the webcam are bespoke parts. However, most of these can actually be replaced with standard parts costing 55% However, three of the bespoke parts, which currently account for 20% of the estimated direct material cost, cannot be replaced, although an alternative supplier charging 10% less has been sourced for these parts.
2. Direct labour cost: the webcam uses 45 minutes of direct labour, which costs $34.67 per hour. The use of more standard parts, however, will mean that while the first unit would still be expected to take 45 minutes, there will now be an expected rate of learning of 90% (where 'b' = – 0.152). This will end after the first 100 units have been completed.

REQUIREMENT

What is the target cost of the new webcam?

$ _____

The following scenario relates to questions 1 – 5.

Scenario

Cam Co manufactures webcams, devices which can provide live video and audio streams via personal computers. It has recently been suffering from liquidity problems and hopes that these will be eased by the launch of its new webcam, which has revolutionary audio and video quality.

The webcam is expected to have a product life cycle of two years. Market research has already been carried out to establish a target selling price and projected lifetime sales volumes for the product. Cost estimates have also been prepared, based on the current proposed product specification. Cam Co uses life cycle costing to work out the target costs for its products. You are provided with the following relevant information for the webcam:

Note. Estimated lifetime cost per unit:

The following information has been identified as relevant:

1. Direct material cost: all of the parts currently proposed for the webcam are bespoke parts. However, most of these can actually be replaced with standard parts costing 55% However, three of the bespoke parts, which currently account for 20% of the estimated direct material cost, cannot be replaced, although an alternative supplier charging 10% less has been sourced for these parts.
2. Direct labour cost: the webcam uses 45 minutes of direct labour, which costs $34.67 per hour. The use of more standard parts, however, will mean that while the first unit would still be expected to take 45 minutes, there will now be an expected rate of learning of 90% (where 'b' = – 0.152). This will end after the first 100 units have been completed.

REQUIREMENT

Which of the following statements about Cam Co's target costing system is/are NOT True?

1. Target costing ensures that new product development costs are recovered in the target price for the webcam.
2. A cost gap is the difference between the target price and the target cost of the webcam.

The following scenario relates to questions 1 – 5.

Scenario

Cam Co manufactures webcams, devices which can provide live video and audio streams via personal computers. It has recently been suffering from liquidity problems and hopes that these will be eased by the launch of its new webcam, which has revolutionary audio and video quality.

The webcam is expected to have a product life cycle of two years. Market research has already been carried out to establish a target selling price and projected lifetime sales volumes for the product. Cost estimates have also been prepared, based on the current proposed product specification. Cam Co uses life cycle costing to work out the target costs for its products. You are provided with the following relevant information for the webcam:

Note. Estimated lifetime cost per unit:

The following information has been identified as relevant:

1. Direct material cost: all of the parts currently proposed for the webcam are bespoke parts. However, most of these can actually be replaced with standard parts costing 55% However, three of the bespoke parts, which currently account for 20% of the estimated direct material cost, cannot be replaced, although an alternative supplier charging 10% less has been sourced for these parts.
2. Direct labour cost: the webcam uses 45 minutes of direct labour, which costs $34.67 per hour. The use of more standard parts, however, will mean that while the first unit would still be expected to take 45 minutes, there will now be an expected rate of learning of 90% (where 'b' = – 0.152). This will end after the first 100 units have been completed.

REQUIREMENT

What is the direct material cost per unit in light of the new information in point (1)?

$ _____ (to two decimal places)

The following scenario relates to questions 1 – 7.

Scenario

Yam Co is involved in the processing of sheet metal into products A, B and C using three processes: pressing, stretching and rolling. The factory has many production lines, each of which contains the three processes. Raw material for the sheet metal is first pressed, then stretched and finally rolled. The processing capacity varies for each process and the factory manager has provided the following data:

The total annual processing hours for the factory is 225,000. On average, one hour of labour is needed for each of the 225,000 hours of factory time. Labour is paid $10 per hour.

The raw materials cost per metre is $2.50 for product B. Other factory costs (excluding labour and raw materials) are $18,000,000 per year. Selling prices per metre are $60 for product B. The return per factory hour of product A is $134.

Yam carries very little inventory. Pressing has been identified as the bottleneck.

REQUIREMENT

What is the return per factory hour of product B?

$ _____

The following scenario relates to questions 1 – 7.

Scenario

Yam Co is involved in the processing of sheet metal into products A, B and C using three processes: pressing, stretching and rolling. The factory has many production lines, each of which contains the three processes. Raw material for the sheet metal is first pressed, then stretched and finally rolled. The processing capacity varies for each process and the factory manager has provided the following data:

The total annual processing hours for the factory is 225,000. On average, one hour of labour is needed for each of the 225,000 hours of factory time. Labour is paid $10 per hour.

The raw materials cost per metre is $2.50 for product B. Other factory costs (excluding labour and raw materials) are $18,000,000 per year. Selling prices per metre are $60 for product B. The return per factory hour of product A is $134.

Yam carries very little inventory. Pressing has been identified as the bottleneck.

REQUIREMENT

What is the maximum output capacity per year for the bottleneck 'pressing' for Product C?

_______ metres

The following scenario relates to questions 1 – 7.

Scenario

Yam Co is involved in the processing of sheet metal into products A, B and C using three processes: pressing, stretching and rolling. The factory has many production lines, each of which contains the three processes. Raw material for the sheet metal is first pressed, then stretched and finally rolled. The processing capacity varies for each process and the factory manager has provided the following data:

The total annual processing hours for the factory is 225,000. On average, one hour of labour is needed for each of the 225,000 hours of factory time. Labour is paid $10 per hour.

The raw materials cost per metre is $2.50 for product B. Other factory costs (excluding labour and raw materials) are $18,000,000 per year. Selling prices per metre are $60 for product B. The return per factory hour of product A is $134.

Yam carries very little inventory. Pressing has been identified as the bottleneck.

REQUIREMENT

What is the maximum output capacity per year for the bottleneck 'pressing' for Product B?

_______ metres

The following scenario relates to questions 1 – 7.

Scenario

Yam Co is involved in the processing of sheet metal into products A, B and C using three processes: pressing, stretching and rolling. The factory has many production lines, each of which contains the three processes. Raw material for the sheet metal is first pressed, then stretched and finally rolled. The processing capacity varies for each process and the factory manager has provided the following data:

The total annual processing hours for the factory is 225,000. On average, one hour of labour is needed for each of the 225,000 hours of factory time. Labour is paid $10 per hour.

The raw materials cost per metre is $2.50 for product B. Other factory costs (excluding labour and raw materials) are $18,000,000 per year. Selling prices per metre are $60 for product B. The return per factory hour of product A is $134.

Yam carries very little inventory. Pressing has been identified as the bottleneck.

REQUIREMENT

Which of the following statements about throughput accounting in Yam Co is/are TRUE?

1. When the bottleneck 'pressing' is overcome ('elevated'), a new bottleneck will appear.
2. It should be expected that the throughput accounting ratio for any product in Yam Co will exceed 1.

The following scenario relates to questions 1 – 7.

Scenario

Yam Co is involved in the processing of sheet metal into products A, B and C using three processes: pressing, stretching and rolling. The factory has many production lines, each of which contains the three processes. Raw material for the sheet metal is first pressed, then stretched and finally rolled. The processing capacity varies for each process and the factory manager has provided the following data:

The total annual processing hours for the factory is 225,000. On average, one hour of labour is needed for each of the 225,000 hours of factory time. Labour is paid $10 per hour.

The raw materials cost per metre is $2.50 for product B. Other factory costs (excluding labour and raw materials) are $18,000,000 per year. Selling prices per metre are $60 for product B. The return per factory hour of product A is $134.

Yam carries very little inventory. Pressing has been identified as the bottleneck.

REQUIREMENT

What is the maximum output capacity per year for the bottleneck 'pressing' for Product A?

_______ metres

The following scenario relates to questions 1 – 7.

Scenario

Yam Co is involved in the processing of sheet metal into products A, B and C using three processes: pressing, stretching and rolling. The factory has many production lines, each of which contains the three processes. Raw material for the sheet metal is first pressed, then stretched and finally rolled. The processing capacity varies for each process and the factory manager has provided the following data:

The total annual processing hours for the factory is 225,000. On average, one hour of labour is needed for each of the 225,000 hours of factory time. Labour is paid $10 per hour.

The raw materials cost per metre is $2.50 for product B. Other factory costs (excluding labour and raw materials) are $18,000,000 per year. Selling prices per metre are $60 for product B. The return per factory hour of product A is $134.

Yam carries very little inventory. Pressing has been identified as the bottleneck.

REQUIREMENT

Yam Co is considering increasing the labour rate per hour. This would result in a conversion cost per factory hour of $95.

What is the throughput accounting ratio (TPAR) for product A assuming that this change occurs and the bottleneck process is fully utilised? (to two decimal points)

The following scenario relates to questions 1 – 7.

Scenario

Yam Co is involved in the processing of sheet metal into products A, B and C using three processes: pressing, stretching and rolling. The factory has many production lines, each of which contains the three processes. Raw material for the sheet metal is first pressed, then stretched and finally rolled. The processing capacity varies for each process and the factory manager has provided the following data:

The total annual processing hours for the factory is 225,000. On average, one hour of labour is needed for each of the 225,000 hours of factory time. Labour is paid $10 per hour.

The raw materials cost per metre is $2.50 for product B. Other factory costs (excluding labour and raw materials) are $18,000,000 per year. Selling prices per metre are $60 for product B. The return per factory hour of product A is $134.

Yam carries very little inventory. Pressing has been identified as the bottleneck.

REQUIREMENT

What is the conversion cost per factory hour?

$ _______

The following scenario relates to questions 1 – 5.

Scenario

Ivey Co is an electronics business operating within an advanced manufacturing technology environment, producing fitness watches, weighing scales and other electronic items. It uses life cycle costing (LCC).

Ivey Co is about to launch a new electronic gadget called the Diam, for measuring health statistics in patients who are unwell. It intends to sell the gadget to hospitals.

Ivey Co is also thinking of developing a 'smart' weighing scales that scans food labels and give nutrients based on the weight.

REQUIREMENT

Are the following statements True or False?

1. Ivey Co uses an expensive costing system
2. Ivey Co's costing system is quicker to use than traditional absorption costing

The following scenario relates to questions 1 – 5.

Scenario

Ivey Co is an electronics business operating within an advanced manufacturing technology environment, producing fitness watches, weighing scales and other electronic items. It uses life cycle costing (LCC).

Ivey Co is about to launch a new electronic gadget called the Diam, for measuring health statistics in patients who are unwell. It intends to sell the gadget to hospitals.

Ivey Co is also thinking of developing a 'smart' weighing scales that scans food labels and give nutrients based on the weight.

REQUIREMENT

What is the life cycle cost per unit for the Diam?

The following scenario relates to questions 1 – 5.

Scenario

Ivey Co is an electronics business operating within an advanced manufacturing technology environment, producing fitness watches, weighing scales and other electronic items. It uses life cycle costing (LCC).

Ivey Co is about to launch a new electronic gadget called the Diam, for measuring health statistics in patients who are unwell. It intends to sell the gadget to hospitals.

Ivey Co is also thinking of developing a 'smart' weighing scales that scans food labels and give nutrients based on the weight.

REQUIREMENT

When would the bulk of Ivey Co's products' life cycle costs normally be determined?

The following scenario relates to questions 1 – 5.

Scenario

Ivey Co is an electronics business operating within an advanced manufacturing technology environment, producing fitness watches, weighing scales and other electronic items. It uses life cycle costing (LCC).

Ivey Co is about to launch a new electronic gadget called the Diam, for measuring health statistics in patients who are unwell. It intends to sell the gadget to hospitals.

Ivey Co is also thinking of developing a 'smart' weighing scales that scans food labels and give nutrients based on the weight.

REQUIREMENT

Which of the following costs would be included in the life cycle cost of the smart weighing scales?

1. Scales concept design costs
2. Scales testing costs
3. Scales production costs
4. Scales distribution costs

The following scenario relates to questions 1 – 5.

Scenario

Ivey Co is an electronics business operating within an advanced manufacturing technology environment, producing fitness watches, weighing scales and other electronic items. It uses life cycle costing (LCC).

Ivey Co is about to launch a new electronic gadget called the Diam, for measuring health statistics in patients who are unwell. It intends to sell the gadget to hospitals.

Ivey Co is also thinking of developing a 'smart' weighing scales that scans food labels and give nutrients based on the weight.

REQUIREMENT

Which TWO of the following statements about using LCC for the diam are True?