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DynaGolf Production Activities Summary Drivers Wedges Putters Production (in units) 10,000 15,000 5,000 Number of production runs 1 3 10 DynaGolf

DynaGolf Production Activities Summary
Drivers Wedges Putters
Production (in units) 10,000 15,000 5,000
Number of production runs 1 3 10

DynaGolf Shipping Department Activities Summary
Drivers Wedges Putters
Shipments (in units) 10,000 15,000 5,000
Number of shipments 1 5 20

Labor includes the machinists’ time doing setup labor, which is required before the production process can begin, and the machine operators’ time during the production run itself. Both machinists and machine operators cost $20 per hour. The production run also consumes machine hours. The raw materials, labor, and machine hours used in the process are summarized in the following table:
DynaGolf Machining Department Activities Summary
Drivers Wedges Putters
Raw materials
Components required per unit 5 6 10
Cost per component $4 $5 $1
Total raw materials cost per unit $20 $30 $10
Labor cost (at $20 per hour)
Setup labor (per production run) 10 hrs 10 hrs 11 hrs
Run labor (per club head) 1/2 hr 1/3 hr 1/4 hr
Machine hours (per club head) 1/4 hr 1/3 hr 1/2 hr

The Machining department has a total budget of $700,000 in a typical month, which includes depreciation and maintenance on the machines and the cost of the electricity to run them. This, and other totals for departmental overhead, appear in the table below:

DynaGolf Departmental Overhead Totals (in $000)
Receiving department 300
Engineering department 500
Machining department 700
Packing department 200
Setup department 3
Total manufacturing overhead 1,703

QUESTIONS: USING THE DATA PROVIDED-

1. Calculate the per-unit costs for each product using the current system.

2. Calculate the per-unit costs for each product using Phil Meyers’ proposed system.

3. Calculate the per-unit costs for each product using activity-based costing.

4. Using the results of your calculations, assume you are the consultant that Joe Bell should have hired instead of talking with his board member, Steve Barber. Prepare a brief report that provides a comprehensive analysis of the problems DynaGolf is facing here. Make recommendations that will justify your outrageous consulting fee. Specifically, recommend a cost system (with a very clear rationale for adopting it) and make good suggestions for operational improvements that should be obvious after you think about the case and construct the three cost systems above.

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