Lutz, Inc. produces three products: Quality, Superior, and Superb. The Lutz cost accounting system applied Conversion Costs using a Plant-Wide Application Rate using Direct Labor Hours as the Cost Driver. Lutz is thinking of employing an ABC system for Conversion Costs. Lutz concluded that its plant had six activities with the following Cost Drivers and costs budgeted for the upcoming year: Activity Area Budgeted Costs Cost Driver Material Handeling $258,400 Number of Parts Production Scheduling $114,000 Number of Orders Setups $160,000 Number of Setups Machinery Cost and Maint $3,510,000 Machine Hours Finishing $1,092,000 Direct Labor Hours Packaging/Shipping $190,000 Number orders Shipped TOTAL $5,324,400 It is estimated that there will be 54,600 Direct Labor Hours in the upcoming year The following information summerizes Lutz' Projections of the Cost Drivers listed above by Product type Cost Driver Quality Superior Superb Units to be produced 10,000 5,000 800 # of parts per unit 30 50 120 Production orders 300 70 200 Production Setups 100 50 50 Machine Hrs per unit 7 7 15 DLH per unit 2 5 12 Orders shipped 1,000 2,000 800 Direct Labor $69.11 $72.50 $83.22 Direct Materials $83.00 $97.00 $115.00 Lutz uses a 30% markup above cost to bid for their projects. What are the costs they currently use with the Plant wide model? What Should the prices be if we used ABC? Discussion topic: What does the difference suggest we might be doing wrong with our bids? And if you were the CFO what activity area would you look to improve and give a few generic examples of options for improvement. I need help answering the questions. Only the Discussion Topic.
Lutz, Inc. produces three products: Quality, Superior, and Superb. The Lutz cost accounting system applied Conversion Costs using a Plant-Wide Application Rate using Direct Labor Hours as the Cost Driver. Lutz is thinking of employing an ABC system for Conversion Costs. Lutz concluded that its plant had six activities with the following Cost Drivers and costs budgeted for the upcoming year: Activity Area Budgeted Costs Cost Driver Material Handeling $258,400 Number of Parts Production Scheduling $114,000 Number of Orders Setups $160,000 Number of Setups Machinery Cost and Maint $3,510,000 Machine Hours Finishing $1,092,000 Direct Labor Hours Packaging/Shipping $190,000 Number orders Shipped TOTAL $5,324,400 It is estimated that there will be 54,600 Direct Labor Hours in the upcoming year The following information summerizes Lutz' Projections of the Cost Drivers listed above by Product type Cost Driver Quality Superior Superb Units to be produced 10,000 5,000 800 # of parts per unit 30 50 120 Production orders 300 70 200 Production Setups 100 50 50 Machine Hrs per unit 7 7 15 DLH per unit 2 5 12 Orders shipped 1,000 2,000 800 Direct Labor $69.11 $72.50 $83.22 Direct Materials $83.00 $97.00 $115.00 Lutz uses a 30% markup above cost to bid for their projects. What are the costs they currently use with the Plant wide model? What Should the prices be if we used ABC? Discussion topic: What does the difference suggest we might be doing wrong with our bids? And if you were the CFO what activity area would you look to improve and give a few generic examples of options for improvement. I need help answering the questions. Only the Discussion Topic.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter4: Activity-based Costing
Section: Chapter Questions
Problem 6E: Eclipse Motor Company manufactures two types of specialty electric motors, a commercial motor and a...
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Lutz, Inc. produces three products: Quality, Superior, and Superb. The Lutz cost accounting system applied Conversion Costs using a Plant-Wide Application Rate using Direct Labor Hours as the Cost Driver. Lutz is thinking of employing an ABC system for Conversion Costs. | ||||||||||
Lutz concluded that its plant had six activities with the following Cost Drivers and costs budgeted for the upcoming year: | ||||||||||
Activity Area | Budgeted Costs | Cost Driver | ||||||||
Material Handeling | $258,400 | Number of Parts | ||||||||
Production Scheduling | $114,000 | Number of Orders | ||||||||
Setups | $160,000 | Number of Setups | ||||||||
Machinery Cost and Maint | $3,510,000 | Machine Hours | ||||||||
Finishing | $1,092,000 | Direct Labor Hours | ||||||||
Packaging/Shipping | $190,000 | Number orders Shipped | ||||||||
TOTAL | $5,324,400 | |||||||||
It is estimated that there will be 54,600 Direct Labor Hours in the upcoming year | ||||||||||
The following information summerizes Lutz' Projections of the Cost Drivers listed above by Product type | ||||||||||
Cost Driver | Quality | Superior | Superb | |||||||
Units to be produced | 10,000 | 5,000 | 800 | |||||||
# of parts per unit | 30 | 50 | 120 | |||||||
Production orders | 300 | 70 | 200 | |||||||
Production Setups | 100 | 50 | 50 | |||||||
Machine Hrs per unit | 7 | 7 | 15 | |||||||
DLH per unit | 2 | 5 | 12 | |||||||
Orders shipped | 1,000 | 2,000 | 800 | |||||||
Direct Labor | $69.11 | $72.50 | $83.22 | |||||||
Direct Materials | $83.00 | $97.00 | $115.00 | |||||||
Lutz uses a 30% markup above cost to bid for their projects. What are the costs they currently use with the Plant wide model? | ||||||||||
What Should the prices be if we used ABC? | ||||||||||
Discussion topic: What does the difference suggest we might be doing wrong with our bids? And if you were the CFO what activity area would you look to improve and give a few generic examples of options for improvement. I need help answering the questions. Only the Discussion Topic. |
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