Conquest Machining Ltd

question 47

Essay

Conquest Machining Ltd. is a manufacturer of precision hand tools, is concerned with the apparent lack of controls over cost incurrence in its Pliers Division. The division has always used a plantwide rate for allocating manufacturing overhead to its products. However, some products cost substantially more than competitors retail prices while others are substantially less. The division manager believes that a better cost allocation method can be developed.
With the assistance of a plant supervisor, the accounting department has been able to establish the following relationships between production activities and the indirect costs of the activities:

The traditional allocation method is based upon direct manufacturing labour hours, and if that method is used the rate is $28 per hour.
Required:
Compute the unit indirect manufacturing costs of a batch of 200 tools if the batch required 220 parts, 8 machine hours, 52 minutes of finishing time, and 46 direct labour hours:

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Definitions:

Production Possibilities Curve

A graphical representation showing the maximum combination of goods and services that can be produced in a given period with available resources, illustrating the trade-offs and opportunity costs.

Units of Guns

A measure or quantity of firearms; colloquially, it can refer to military spending or resources in discussions of trade-offs between defense and civilian spending.

Units of Butter

A measurement used to quantify butter, typically in pounds or kilograms, often used as an example in economic theories to explain concepts like trade-offs and opportunity costs.

Opportunity Cost

Failing to capitalize on potential gains from other alternatives when making a singular choice.