\"Shelby Shelving is a small company that manufactures two types of shelves for
ID: 3317942 • Letter: #
Question
"Shelby Shelving is a small company that manufactures two types of shelves for grocery stores. Model S is the standard model; model LX is a heavy-duty version. Shelves are manufactured in three major steps: stamping, forming, and assembly. In the stamping stage, a large machine is used to stamp (i.e., cut) standard sheets of metal into appropriate sizes. In the forming stage, another machine bends the metal into shape. Assembly involves joining the parts with a combination of soldering and riveting. Shelby’s stamping and forming machines work on both models of shelves. Separate assembly departments are used for the final stage of production. The file Shelby Shelving.xlsx contains relevant data for Shelby. (See attached Excel workbook) The hours required on each machine for each unit of product are shown in the range B5:C6 of the Accounting Data sheet. For example, the production of one model S shelf requires 0.25 hour on the forming machine. Both the stamping and forming machines can operate for 800 hours each month. The model S assembly department has a monthly capacity of 1900 units. The model LX assembly department has a monthly capacity of only 1400 units. Currently Shelby is producing and selling 400 units of model S and 1400 units of model LX per month. Model S shelves are sold for $1800, and model LX shelves are sold for $2100. Shelby’s operation is fairly small in the industry, and management at Shelby believes it cannot raise prices beyond these levels because of the competition. However, the marketing department believes that Shelby can sell as much as it can produce at these prices"
3. Fixed costs in cell G5:G8 are large because each of these costs is a function of output produced. True or False
Shelby Shelving- Current Production Schedule Machine usage requirements (hours per unit Stamping Forming Model S Model LX Available 0.30 0.50 0.30 0.25 800 800 Model S 400 Model LX 1400 Monthly production 1900 $1,800 Assembly capacity 1400 Unit selling price Hours spent in departments Stamping $2,100 Model S Model LX Totals 120 100 420 700 540 800 Forming Percentages of time spent in departments Stamping Model S Model LX 22.2% 12.5% 77.8% 87.5% Forming Monthly overhead cost data Stam ping Forming ModelS Assembly Model LX Assembly Model S Variable S80 S120 165 S0 365 Model LX Variable S90 S170 S0 S185 $445 Total Fixed S125,000 S95,000 580,000 $85,000 S385,000 Standard costs of the shelves (based on the current ion levels Model S Model LX Direct materials $1,000 $1,200 Direct labor: Stamping Forming Assembly $35 $90 $85 $210 $35 $60 $80 Total direct labor Overhead allocation $175 Stamping Forming Assembly $149.44 $159.44 149.69 $229.38 $365.00 $245.71 $664.13 $634.53 $1,839.13 $2,044.53 Total overhead Total costExplanation / Answer
False
Fixed costs do not include the costs of output produced. These costs are there even if there is no production.
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