Goldman Company has structured its operations on a cell-based system. Each manuf

Question

Goldman Company has structured its operations on a cell-based system. Each manufacturing cell is dedicated to the production of a single product or major subassembly. One cell, dedicated to the production of telescopes, has four operations: machining, finishing, assembly, and qualifying (testing).

Required:

1. Calculate the velocity (number of telescopes per hour) that the cell can theoretically achieve. Now, calculate the theoretical cycle time (number of hours or minutes per telescope) that it takes to produce one telescope. Round your answers to one decimal place.

2. Calculate the actual velocity and the actual cycle time. Round your answers to two decimal places.

3. Calculate the budgeted conversion costs per minute. Using this rate, calculate the conversion costs per telescope if theoretical output is achieved. Using this measure, calculate the conversion costs per telescope for actual output. Round your answers to the nearest cent.

Does this product costing approach provide an incentive for the cell manager to reduce cycle time (Yes or No)?

Explain.

Theoretical velocity telescopes per hour Theoretical cycle time minutes per telescope

Explanation / Answer

1.

Theoretical cycle time: 12000 hours /90,000 telescopers = 0.133 hours = 0.133x60 = 8 min/telescope

2.

actual velocity = 75,000 telescopes/ 12,000 hours = 6.25 telescopes per hour

actual cycle time = 12000 hours /75,000 telescopers =0.16 hours = 0.16* 60 = 9.6 mintues oer telescope .

3. Budgeted conversion cost = $ 75,00,000/12,000*60 =$ 10.412 per minute

theoretical conversion cost per telescope = $ 10.412*8 = $ 83.296

actual conversion cost per telescopic=$ 10.412* 9.6 =$ 99.95

No it does not because conversion cost is same at different levels of production

Theoretical velocity : 90,000 telescopes/ 12,000 hours = 7.50  telescopes per hour

Theoretical cycle time: 12000 hours /90,000 telescopers = 0.133 hours = 0.133x60 = 8 min/telescope

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