Ringorag - Contents 1. Introduction and Description of...

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Contents 1. Introduction and Description of Ringo Rag’s Process 2. Current Cost Calculations 3. Alternative Scenarios a. Do not sort and grade the scrap sourced from junk dealers b. Do not sort and grade the scrap from commercial laundries in addition to not grading the rags c. Drop the rags source for scrap cotton and source from commercial laundries 4. Conclusion
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Introduction and Description of Ringo Rag’s Process The Ringo Rag Company produces rags for local businesses like garages in a continuous process. Except for the grade of the rag the production process is homogenous. The various steps in the production process are as follows The scrap cotton is obtained from 3 sources. The one’s sourced from junk dealers are washed and dried. These and the scrap cotton obtained from the commercial laundries are graded according to their absorption capacity into Grades A, B and C respectively. The cotton is then cut into the rags of the required shape and then boxed in cartons. 25 women are engaged in grading, cutting and packing. 2 foremen are engaged in loading and unloading the washers and dryers and in transporting the cartons into the holding areas. They also supervise the 25 women workers. Wash and Dry the scrap cotton obtained from junk Sort and grade the scrap cotton from above and from the commercial Cut the scrap cotton from all three sources into rags of the required shape. Remove any attachments Pack the rags into Junk Dealers Commercial Laundries Textile Converters
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Current Cost Calculations Direct Material Cost Scrap Cotton from Textile Convertors Grade Weight in lbs Cost/cwt Total Cost Grade A 43750 6 2625 Grade B 25000 5 1250 Grade C 6250 4 250 75000 4125 Scrap Cotton from Commercial Laundries Weight in lbs Cost/cwt Cost 60000 3 1800 Scrap Cotton from Junk Dealers Weight in lbs Cost/cwt Cost 50000 1 500 Total Material Cost for the month is $6425. Direct Labor Cost Time(hrs) Cost @ $1.1/hr 25 women in 3 depts Textile Laundry Junk Grading 1000 1100 0.00 600.00 500.00 activity based See note 'a' below Cutting 3000 3300 1523.08 1015.38 761.54 activity based See note 'b' below Packing 600 660 316.80 211.20 132.00 activity based See note 'c' below 2 foremen Loading/Unloading 312.5 0.00 0.00 312.50 activity based See note 'd' below Moving 312.5 150.00 100.00 62.50 activity based See note 'e' below Total 5685 1989.88 1926.58 1768.54 Note 'a' : Only Laundry and Junk cotton need to be graded. So cost in divided in ratio of weights, 600cwt:500cwt Note 'b' : After grading the ratios of the weights are 750cwt:500cwt:375cwt Note 'c' : After cutting the ratios of the weights are 600cwt:400cwt:250cwt Note 'd' : Only the junk rags need to loaded and unloaded Note 'e' : Costs are divided in the ratio of the weights, 600:400:250 cwt
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Manufacturing Overhead Manufacturing Overhead is traced to the extent possible. The unallocated amount is treated as
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Ringorag - Contents 1. Introduction and Description of...

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