Assignment 1 - Section A Kexin Gong 101052717 5-39 1 Direct...

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Section A Kexin Gong 101052717 5-39 1. Direct materials----purses: output unit-level costs Direct materials---backpacks: output unit-level costs Direct labour---purses: output unit-level costs Direct labour---backpacks: output unit-level costs Setup---batch-level costs Shipping-batch-level costs Design---product-sustaining costs Plant utilities and administration---facility-sustaining costs 2. Direct materials—purses: Number of bags Direct materials—backpacks: Number of bags Direct manufacturing labour—purses: Number of bags Direct manufacturing labour—backpacks: Number of bags Setup: Number of batches Shipping: Number of batches Design: Number of designs Plant utilities and administration: Hours of production Direct material costs and direct manufacturing labour costs can be traced to output directly though the number of bags produced. Setup and shipping are both based on the number of batches produced. Design is related to the number of designs for each product. Plant utilities and administration generated from the hours of production, which should be considered a proper cost driver. 3. Direct materials—purses: $362,000 ÷ 3,150 = $114.92 per purse Direct materials—backpacks: $427,000 ÷ 6,000 = $71.17 per backpack Direct manufacturing labour—purses: $98,000 ÷ 3,150 = $31.11 per purse Direct manufacturing labour—backpacks: $115,597 ÷ 6,000= $19.27 per backpack 1
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Section A Kexin Gong 101052717 Setup: $64,960 ÷ 203 = $320 per batch Shipping: $72,065 ÷ 203 = $355 per batch Design: $167,000 ÷ 5 = $33,400 per design Plant utilities and administration: $225,000 ÷ 4,160 hours = $54.09 per hour 4. Purses Backpacks Total Direct materials 362,000 427,000 789,000 Direct labour 98,000 115,597 213,597 Setup 320*70=22,400 320*133=42,560 64,960 Shipping 355*70=24,850 355*133=47,215 72,065 Design 33,400*2=66,800 33,400*3=100,200 167,000 Plant utilities and Administration 54.09*2600=140,634 54.09*1560=84,380 225,014 Total costs 714,684 84,380 1,531,636 Cost per unit 226.88 136.16 5. The costs of direct materials are so high that these costs are more than half of the total costs,
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