Explain how the work cell manufacturing layout increases productivity.
Work cell manufacturing layout increases productivity by eliminating work in process, reducing wastage, and having less supervision in the manufacturing process.
A work cell under JIT is an area that provides everything needed for the manufacturing process. A work cell is accompanied by required machinery and labor resources.
Unlike the traditional manufacturing system, the work cell layout does not separate the production process into separate departments. Under work cell employees work in a team and complete the work without any supervision. Production is done in small batches of units and quality inspection is done throughout the process. As soon as the finished product is moved out of the work cell, and the more raw material is procured for the supplier just in time. So, in this way, there is no work in process inventory in this system.
Thus, in this way, a demand-pull system works under a work cell layout that reduces waste and increases production without moving the work in process.
Martin, Inc. manufactures bookcases and uses an activity-based costing system. Martin’s activity areas and related data follow:
Budgeted Cost of Activity
Predetermined Overhead Allocation Rate
Number of parts
Number of assembling direct labor hours
Number of finished units*
*Refers to the number of units receiving the finishing activity, not the number of units transferred to Finished Goods Inventory
Martin produced two styles of bookcases in April: the standard bookcase and an unfinished bookcase, which has fewer parts and requires no finishing. The totals for quantities, direct materials costs, and other data follow:
Total Units Produced
Total Direct materials Costs
Total Direct Labor Costs
Total Number of Parts
Total Assembling Direct Labor Hours
2. Suppose that pre-manufacturing activities, such as product design, were assigned to the standard bookcases at $5 each and to the unfinished bookcases at $3 each. Similar analyses were conducted of post-manufacturing activities such as distribution, marketing, and customer service. The post-manufacturing costs were $24 per standard bookcase and $18 per unfinished bookcase. Compute the full product costs per unit.
Willette Pharmaceuticals manufactures an over-the-counter allergy medication. The company sells both large commercial containers of 1,000 capsules to health care facilities and travel packs of 20 capsules to shops in airports, train stations, and hotels. The following information has been developed to determine if an activity-based costing system would be beneficial:
Activity Estimated Estimated Quantity
Indirect Cost Allocation Base of Allocation Base
Materials handling $ 95,000 Number of kilos 19,000 kilos
Packaging 200,000 Number of machine hours 5,000 hours
Quality assurance 112,500 Number of samples 1,875 samples
Total indirect costs $ 407,500
Actual production information includes the following:
Commercial Containers Travel Packs
Units produced 2,400 containers 50,000 packs
Weight in kilos 9,600 5,000
Machine hours 1,680 500
Number of samples 240 750
1. Willitte’s original single plantwide overhead allocation rate costing system allocated indirect costs to products at $81.50 per machine hour. Compute the total indirect costs allocated to the commercial containers and to the travel packs under the original system. Then compute the indirect cost per unit for each product. Round to two decimal places.
Rennie Plant Service completed a special landscaping job for Brenton Company. rennie uses ABC and has the following predetermined overhead allocation rates:
Allocation Base Overhead Allocation Rate
Designing Number of designs $ 290 per design
Planting Number of plants $ 20 per plant
The Rennie job included $1,500 in plants; $800 in direct labor; one design; and 30 plants.
2. If Brenton paid $3,690 for the job, what is the operating income or loss?
The following information is provided for Orbit Antenna Corp., which manufactures two products: Lo-Gain antennas and Hi-Gain antennas for use in remote areas.
Activity Cost Allocation Base
Setup $ 58,000 Number of setups
Machine maintenance 30,000 Number of machine hours
Total indirect manufacturing costs $ 88,000
Lo-Gain Hi-Gain Total
Direct labor hours 1,200 3,800 5,000
Number of setups 40 40 80
Number of machine hours 3,000 2,000 5,000
Orbit Antenna plans to produce 125 Lo-Gain antennas and 225 Hi-Gain antennas.
2. Compute the ABC indirect manufacturing cost per unit for each product.
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