the Intrepid and Explorer.
SuperClassProblem 3
Braithwaite Company manufactures two types of kayaks, the Intrepid and Explorer. Previously, the company has allocated manufacturing support costs using a plant-wide rate based on direct labour hours. It has been suggested that the company consider assigning support costs to the equipment using activity-based costing. The following data has been collected:
Item | Intrepid | Explorer |
Units produced and sold | 50,000 | 20,000 |
Direct labour hours used | 25,000 | 20,000 |
Direct labour cost | $75,000 | $60,000 |
Number of times each unit is handled | 3 | 5 |
Number of cuts per unit | 2 | 6 |
Number of design changes (total) | 5 | 10 |
Number of product setups (total) | 30 | 40 |
The actual manufacturing support costs incurred were as follows:
| Related Costs |
Handling | $ 500,000 |
Cutting | 1,500,000 |
Design changes | 600,000 |
Setups | 20,000 |
Total | $2,620,000 |
The direct material cost for the Intrepid model is $500 per unit, and for the Explorer model, $700 per unit.
Required:
1. Determine the unit cost of each product using direct labour hours to allocate all manufacturing support costs.
2. Determine the unit cost of each product using activity-based costing.
3. Explain why the unit cost is different in requirements 1 and 2.
Problem 6 (12 marks)
Whyte Trucks Inc. produces large, heavy duty trucks. It is attempting to reduce manufacturing costs. It polled customers with respect to product requirements and obtained the following information:
Category | Importance |
Driver comfort | 30 |
Fuel efficiency | 50 |
Safety | 20 |
Whyte identified the following target costs for various truck components:
Function group | Target cost |
Frame | $30,000 |
Engine | 50,000 |
Body | 40,000 |
Other | 80,000 |
Whyte engineers produced the following quality function deployment matrix:
|
|
| |||
|
| Function group | |||
Categories |
| Frame | Engine | Body | Other |
Driver comfort |
| .2 |
| .2 | .6 |
Fuel efficiency |
|
| .6 | .3 | .1 |
Safety |
| .3 | .1 | .2 | .4 |
Required: Determine which function groups are candidates for cost reduction.
10 years ago
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