'Harrison Products Essay\r'

'Harrison harvests Inc. (HPI) is a global manufacturing business of molded plastic products and metal products that ar used in the auto industry, sustenance and beverage industry (containers), and in a variety of early(a) products and packaging materials. HPI has roughly(prenominal) manufacturing correct located world-wide, generally in locations convenient to the company’s most significant customers.\r\nThe present case considers unmatched of HPI’s products, a one congius metal can container used for cay and other chemical products. The product is produced in two U.S. locations, Los Angeles, CA, and Youngstown, OH. These marks produce several one million million million of these cans all(prenominal) year.\r\nThe competitive environment for HPI is challenging. Competitors in all move of the world gainsay HPI on price, which is the primary order-winning factor in the business. All HPI customers expect very broad(prenominal) quality and prompt service, s o contest on hurt and reliability in diddleing delivery dates atomic summate 18 vital to its competitive success.\r\nOperating Data and outline\r\nHPI has focused its production of the one congius metal cans in the two founds, in Los Angeles and Youngstown, Ohio. The summary information in evince 1 shows the plant capacity, normal production, price and cost information. Currently, management believes that production cost ar driven by plenty; management’s goal is to meet competitive cost pressures by increase volume and improving efficiency to puzzle out cost down. For this reason, product be are ground on volume, as illustrated in picture 1. The unit cost for the Los Angeles plant is $1.10, while the unit cost in the Youngstown plant is $1.00. The cost difference reflects the high facilities cost at the Los Angeles plant, which is the sunrise(prenominal)er of the two plants. The Los Angeles plant has similar equipment and manufacturing flow frame to that o f the Youngstown plant, notwithstanding a key difference is that the Los Angeles plant was designed to be more efficacious for littler demarcation (batch) sizings; the equipment and plant lay-out are consistent with greater speed in processing smaller jobs. The decision to design the Los Angeles plant in this way reflected the smaller orders that were generally received by the Los Angeles plant. contrive Exhibit 2 for a ingest of the some of the jobs at the two plants; the butt shows a representative sample of 28 jobs for Los Angles and 41 jobs at the Youngstown plant, showing the meter in each job (job size) and the estimated proceeding per 1,000 units for that job. The number of minutes per 1,000 units is a commonly-used m of job performance at HPI and is called â€Å"runtime.” Product Costs\r\nHPI includes manufacturing costs into three briny categories. First, there is materials cost that includes the metal and other materials necessary in the production of the c ans. These materials are considered direct materials and are $0.40 per unit at each of HFI’s plants. The second course is direct costs which include labor, supervision, some materials used in machine charge and repair, materials receiving and stocking, and related costs. Labor costs include runtime labor, frame-up labor and downtime labor. Operations costs are considered indirect costs and the cost method used is to apply these costs to product based on units of output, as noted above. The two plants have the kindred per unit run cost of $0.50. The thirdly category, facilities costs, includes equipment and the plant facility. Because Los Angeles is the newer plant, these costs are high for Los Angeles, at $0.20 per unit relative to the Youngstown plant, where the facilities cost is $0.10 per unit.\r\nRequired:\r\n1.Using the company’s flow rate costing system, calculate the manufacturing cost and run(a) permissiveness (price less manufacturing cost) for eac h of the jobs in Exhibit 2, for both the Los Angeles and Youngstown plants. 2.Assume that 20% of operating costs are due to frame-up costs and that the remainder are runtime costs. HFI is considering an activity-based draw near which would apply apparatus costs to each job; each job would be applied the same amount of setup cost. Calculate the manufacturing cost and operating margin for each of the jobs in Exhibit 2, for both the Los Angeles and Youngstown plants. 3.Assume as above that 20% of operating costs are due to setup costs and that the remainder are runtime costs. Now, discover that HFI is considering an activity-based approach which would recognize that each setup requires time and material that is partly comparative to the size of the prior job. That is, the part of setup that involves clean-up and preparation of the machine for a new job is longer after a relatively long job than it is for setups that issue forth a relatively short job.\r\nHFI nowadays plans to ap ply setup costs so that one-half of the setup costs would be applied equally to each job and the remainder of setup costs would be applied based on the number of units in the job. Calculate the manufacturing cost and operating margin for each of the jobs in Exhibit 2, for both the Los Angeles and Youngstown plants. 4.Interpret briefly your findings in parts 1,2 and 3 above. Do you support the setup cost application approach in (3) above? Why or why not? What approach do you regard would be preferable? 5.Using analysis based on charts, correlation or reverse analysis or other means, line of business (a) the kind between runtime and job size at both plants, and (b) examine how this relationship differs between the two plants. What are the implications of these relationships, and how they differ between plants, on (a) product costing, and (b) manufacturing dodge?\r\n'