cholesterol producers

cholesterol producers - CHOLESTEROL PRODUCERS (I)1...

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CHOLESTEROL PRODUCERS (I) 1 Cholesterol produces two forms of cholesterol, lochol and hichol . The basic raw material of the production process is crud , which is purchased in 100 kilogram containers. The production process consists of two departments, each with its own machine. The machine in department 1 can be used to process the crud to produce a thick liquid called sludge. This machine can also be used to combine sludge with crud to produce goop . The company almost always uses all of the sludge that it produces, but it sells some of its goop production as well as using it internally. The machine in department 2 uses sludge and goop to produce the firm’s two end products: lochol and hichol . Very little time is required to switch the machine from one product to the other. The basic flow of inputs and outputs are depicted below: To facilitate planning and control, Cholesterol has decided to implement a direct standard cost system. Based on an analysis of its production data, management has set the following standard input quantities per unit of output for the four processes: 1 Prepared by Gerald A. Feltham. Revised November 2001. crud Process 1 sludg e Process 2 goo p Process 3 Process 4 loch ol hich ol Department 2 Department 1 1
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Input Process 1 Process 2 Process 4 Process 5 Crud 2.00 5.00 Sludge .50 1.00 .50 Goop .20 1.00 Labour hours .10 .16 .20 .60 Machine hours – D1 .01 .02 Machine hours – D2 .04 .10 The standard cost for crud is $2.00 per kilogram and for labour it is $10.00 per hour. The old system used a plant-wide overhead rate based on labour hours. However, they now plan to use departmental rates for variable overhead based on the machine hours used by each process. The budgeted monthly overhead for the two departments are: Department #1: $35,000 + $50.00 x machine hours for department 1 Department #2: $40,000 + $40.00 x machine hours for department 2 During the past month the actual departmental overhead was: Department #1: $ 70,000 Department #2: 60,000 Total $ 130,000 REQUIRED: (a) Determine the variable cost per unit of sludge, goop, lochol, and hichol. crud Process 1 sludg e Process 2 goo p Process 3 Process 4 loch ol hich ol Department 2 Department 1 2
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Cost of one unit of Sludge Cost of one unit of Goop Cost of one unit of Lochol Cost of one unit of Hichol crud Process 1 sludg e Process 2 goo p Process 3 Process 4 loch ol hich ol Department 2 Department 1 3
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crud Process 1 sludg e Process 2 goo p Process 3 Process 4 loch ol hich ol Department 2 Department 1 4
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CHOLESTEROL PRODUCERS (II) 2 Cholesterol’s loss last month has caused the company’s management to carefully examine their cost, pricing, and sales activities. The standard variable production costs determined in part (I) will be helpful in this examination. They have also analyzed the marketing and administrative costs. This analysis indicates that marketing costs vary with sales revenue (largely due to commissions paid to salesmen). The following prediction model has been estimated:
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This note was uploaded on 05/03/2010 for the course COMM Comm 354 taught by Professor Sandra during the Spring '09 term at UBC.

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cholesterol producers - CHOLESTEROL PRODUCERS (I)1...

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