Funk Manufacturing Company Produces Specially Machined Parts Activity Drivers for Each Activity Have Been Identified and Their

question 39

Essay

Funk Manufacturing Company produces specially machined parts. The parts are produced in batches in one continuous manufacturing process. Each part is custom produced and requires special engineering design activity (based on customer specifications). Once the design is completed, the equipment can be set up for batch production. Once the batch is completed, a sample is taken and inspected to see if the parts are within the tolerances allowed. Thus, the manufacturing process has four activities: engineering, setups, machining, and inspecting. In addition, there is a sustaining process with two activities: providing utilities (plantwide) and providing space. Costs have been assigned to each activity using direct tracing and resource drivers: $\begin{array}{ll}\text { Engineering } & £ 125,000 \\\text { Setups } & 112,500 \\\text { Machining } & 250,000 \\\text { Inspection } & 100,000 \\\text { Prowiding space } & 31,250 \\\text { Providing utilities } & 22,500\end{array}$ Activity drivers for each activity have been identified and their practical capacities listed: $\begin{array}{ll}\text { Machine hours } & 50,000 \\\text { Setups } & 400 \\\text { Engineering hours } & 10,000 \\\text { Inspection hours } & 5,000\end{array}$ The costs of facility-level activities are assigned using machine hours.
a.Identify the activities within each process as unit-level, batch-level, product-level, or facility-level.
b.Create homogeneous cost pools. Identify the activities that belong to each pool and the activity driver that will be used for computing pool rates.
c.Build an activity relational (i.e. cost) table.
d.Compute the cost pool rates.

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Definitions:

Coinsurance Clause

A provision in insurance policies that requires the policyholder to bear a portion of the costs of a claim, encouraging insured parties to avoid excessive risks.

Insurance Company

An organization that offers risk management in the form of insurance policies, providing financial protection against loss or harm in return for premium payments.

Fire Damages

The physical destruction or harm caused to property and assets by fire.

Semiannual Payments

Payments made twice a year, often used in the context of loan repayments or interest calculations.