Question;Kagle design engineers are in the process of developing a new ?green? product, one that willsignificantly reduce impact on the environment and yet still provide the desired customerfunctionality. Currently, two designs are being considered. The manager of Kagle has told theengineers that the cost for the new product cannot exceed $550 per unit (target cost). In the past,the Cost Accounting Department has given estimated costs using a unit-based system. At therequest of the Engineering Department, Cost Accounting is providing both unit- and activitybased accounting information (made possible by a recent pilot study producing the activity-baseddata).Unit-based system:Variable conversion activity rate: $100 per direct labor hourMaterial usage rate: $20 per partABC system:Labor usage: $15 per direct labor hourMaterial usage (direct materials): $20 per partMachining: $75 per machine hourPurchasing activity: $150 per purchase orderSetup activity: $3,000 per setup hourWarranty activity: $500 per returned unit (usually requires extensive rework)Customer repair cost: $25 per repair hour (average)Required:1. Select the lower-cost design using unit-based costing.Are logistical and post-purchase activities considered in this analysis?2. Select the lower-cost design using ABC analysis.3. What if the post-purchase cost was an environmental contaminant and amounted to $10 perunit for Design A and $40 per unit for Design B?Post-Purchase CostDesign A$Design B$Assume that the environmental cost is borne by society. Now which is the better design?
Paper#42215 | Written in 18-Jul-2015Price : $22