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Chapter 22: 19E (page 1021)

Best Ink produces printers for personal computers. The following information is available for production of a recent order of 500 printers.

Process time

16.0 hours

Move time

9.0 hours

Inspection time

3.5 hours

Wait time

21.5 hours

1. Compute the company’s manufacturing cycle time.

2. Compute the company’s manufacturing cycle efficiency. Interpret your answer.

3. Assume the company wishes to increase its manufacturing cycle efficiency to 0.80. What are some ways to accomplish this?

Short Answer

Expert verified

Cycle time:50 hours.

Cycle efficiency:0.32.

Cycle efficiency can be increased by reducing the time of non-value-adding activities.

Step by step solution

01

Definition of Non-Value Adding Activities

The activities that do not increase the value of the product delivered to the customer are known as non-value-adding activities. Business entities try to minimize these activities to increase speed and reduce cost.

02

Manufacturing cycle time

Particular

Time

Process time

16.0 hours

Move time

9.0 hours

Inspection time

3.5 hours

Wait time

21.5 hours

Cycle time

50 hours

03

Manufacturing cycle efficiency

Manufacturing cycle efficiency =ProcesstimeCycletime

= 16.0hours50.0hours

= 0.32

04

Ways to increase cycle efficiency

Manufacturing cycle efficiency can be increased by reducing the time spent on non-productive activities. It can be increased by reducing the move time, inspection time, and wait time.

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Most popular questions from this chapter

Megamart, a retailer of consumer goods, provides the following information on two of its departments (each considered an investment center).

Investment Center

Sales

Income

Average Invested Assets

Electronic goods

\(40,000,000

\)2,880,000

16,000,000

Sporting goods

20,000,000

2,040,000

12,000,000

1. Compute return on investment for each department. Using return on investment, which department is most efficient at using assets to generate returns for the company?

2. Assume a target income level of 12% of average invested assets. Compute residual income for each department. Which department generated the most residual income for the company?

3. Assume the electronics department is presented with a new investment opportunity that will yield a 15% return on investment. Should the new investment opportunity be accepted? Explain.

Use the information in the following table to compute each department’s contribution to overhead (both in dollars and as a percent). Which department contributes the largest dollar amount to total overhead? Which contributes the highest percent (as a percent of sales)? Round percents to one decimal.

Dept. A

Dept. B

Dept. C

Sales

\(53,000

\)180,000

\(84,000

Cost of goods sold

34,185

103,700

49,560

Gross profit

18,815

76,300

34,440

Total direct expenses

3,660

37,060

7,386

Contribution to overheads

\)

\(

\)

Contribution percent of sales

%

%

%

Vortex Company operates a retail store with two departments. Information about those departments follows.

Department A

Department B

Sales

\(800,000

\)450,000

Cost of goods sold

497,000

291,000

Direct expenses

Salaries

125,000

88,000

Insurance

20,000

10,000

Utilities

24,000

14,000

Depreciation

21,000

12,000

Maintenance

7,000

5,000

The company also incurred the following indirect costs.

Salaries

$36,000

Insurance

6,000

Depreciation

15,000

Office expenses

50,000

Indirect costs are allocated as follows: salaries on the basis of sales; insurance and depreciation on the basis of square footage; and office expenses on the basis of number of employees. Additional information about the departments follows.

Department

Square footage

Number of employees

A

28,000

75

B

12,000

50

Required

1. For each department, determine the departmental contribution to overhead and the departmental net income.

2. Should Department B be eliminated? Explain

Woh Che Co. has four departments: materials, personnel, manufacturing, and packaging. In a recent month, the four departments incurred three shared indirect expenses. The amounts of these indirect expenses and the bases used to allocate them follow.

Indirect expenses

Cost

Allocation Base

Supervision

\(82,500

Number of Employees

Utilities

50,000

Square feet occupied

Insurance

22,500

Value of assets in use

Total

\)155,000

Departmental data for the company’s recent reporting period follow.

Department

Employees

Square feet

Asset values

Material

27

25,000

\(6,000

Personnel

9

5,000

1,200

Manufacturing

63

55,000

37,800

Packaging

51

15,000

15,000

Total

150

100,000

\)60,000

1. Use this information to allocate each of the three indirect expenses across the four departments.

2. Prepare a summary table that reports the indirect expenses assigned to each of the four departments.

Question: Why are many companies divided into departments?
See all solutions

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