# B assume that in month 6 the move time process time

• Notes
• 8
• 97% (36) 35 out of 36 people found this document helpful

This preview shows pages 5–7. Sign up to view the full content.

b. Assume that in month 6 the move time, process time, and so forth, are the same as for month 4, except that the company is able to completely eliminate both the queue time during production and the inspection time. Compute the new throughput time and MCE. Months Throughout time in days: 5 6 Process time 0.6 0.6 Inspection time 0.8 0.0 Move time 1.4 1.4 Queue time 0.0 0.0 Total throughput time 2.8 2.0 Manufacturing cycle efficiency (MCE) Process time 0.6 0.6 Throughput time 2.8 2.0 MCE = 21.43% 30.00% As non-value-added activities are eliminated, the manufacturing cycle efficiency improves. The goal, of course, is to have an efficiency of 100%. This is achieved when all non-value added activities have been eliminated and process time equals throughput time.

This preview has intentionally blurred sections. Sign up to view the full version.

Exercise 11B-3 Service Department Charges Given: Gutherie Oil Company has a Transport Services Department that provides trucks to transport crude oil from docks to the company's Arbon Refinery and Beck Refinery. Budgeted costs for the transport During the year, the Transport Services Department actually hauled the following amounts of crude Most common method of allocation: Actual Variable Cost Incurred \$148,000 Variable cost per gallon hauled \$0.3700 Actual Fixed Costs Incurred \$217,000 Total Costs Incurred \$365,000 Gallon hauled by Transport Services: Hauled to Arbon Refinery 260,000 Hauled to Beck Refinery 140,000 Total gallons hauled 400,000 Average cost per gallon hauled: \$0.9125 Arbon Beck Total Allocation: actual gallons X actual rate \$237,250 \$127,750 \$365,000 Problems: 1. Efficiencies and inefficiencies of service departments are passed on to production departments. 2. The operations of one production department affect the other departments. Required: 1. 2. Arbon Beck Total Peak period capacity needs 60% 40% 100% Budgeted fixed costs \$200,000 \$0.30 Allocation of Variable Costs: Arbon Beck Total Allocation: actual gallons X budgeted rate \$78,000 \$42,000 \$120,000 Allocation of Fixed Costs: Allocation: Peak period % X budgeted FC 120,000 80,000 200,000 Total Costs Allocated \$198,000 \$122,000 \$320,000 3. Will any of the \$365,000 in the Transport Services Department cost not be charged to the refineries? Variable Costs Fixed Costs Total Total Transport Services Department Costs Incurred \$148,000 \$217,000 \$365,000 Total Transport Services Department Costs Assigned \$120,000 200,000 \$320,000 Total Transport Services Department Costs Unassigned \$28,000 \$17,000 \$45,000 The overall spending variance of \$45,000 represents costs incurred in excess of the budgeted \$.30 per gallon variable cost and budgeted \$200,000 in fixed costs. This \$45,000 in unallocated cost is the responsibility of the Transport Services Department. services consist of \$0.30 per gallon variable cost and \$200,000 fixed cost. The level of fixed cost is determined by peak-period requirements. During the peak period, Arbon Refinery requires 60% of the capacity and the Beck Refinery requires 40% . oil for the two refineries: Arbon Refinery, 260,000 gallons; and Beck Refinery, 140,000 gallons. The Transport Services Department incurred \$365,000 in cost during the year, of which \$148,000 was variable cost and \$217,000 was fixed cost.
This is the end of the preview. Sign up to access the rest of the document.
• Fall '12
• StephenD.Joyce
• Cycle Time, Division B

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern