Arctic Insulation
Q1: Are unit cost per bale rising or falling between 1979 and 1980? Support your answer with the relevant cost calculations.
The company use two types of sources to produces insulation material. These two types are paper that can be bought from the public and the other source is paper that can be bought from the scrap paper dealer. The first method has a higher direct labor associated with it than the second method. That is because the company needs more workers to handle and form the paper the company buys from the public than the workers it needs to handle the paper it purchases from the dealers.
To answer the question, the unit cost per bale has felled between 1979 and 1980. This can be easily seen by unit per cost calculations. …show more content…
It does not make sense to use the direct labor cost to allocate the overhead cost because the direct labor cost is not the most part of the total cost of the purchased paper. Thus, to solve this issue the company should use the division manager method to allocate the OH cost for the formed and the purchased paper. We can take the total OH cost (depot and division) and divide them by the total number of units (formed and purchased) and that will give us a fair OH cost per unit than we can add the direct labor cost to this stander and then calculate the total unit cost per each type of …show more content…
On the other hand, buying the causal paper or the paper from the public contributes to a high labor cost. As stated in the case, the workers in 1980 get paid at a very high rate which means the company should work on cutting off the labor cost by reducing the work hours or reducing the number of workers. That can only be done if the company focused more on buying the paper from the dealers more than buying them from the
Q1: Are unit cost per bale rising or falling between 1979 and 1980? Support your answer with the relevant cost calculations.
The company use two types of sources to produces insulation material. These two types are paper that can be bought from the public and the other source is paper that can be bought from the scrap paper dealer. The first method has a higher direct labor associated with it than the second method. That is because the company needs more workers to handle and form the paper the company buys from the public than the workers it needs to handle the paper it purchases from the dealers.
To answer the question, the unit cost per bale has felled between 1979 and 1980. This can be easily seen by unit per cost calculations. …show more content…
It does not make sense to use the direct labor cost to allocate the overhead cost because the direct labor cost is not the most part of the total cost of the purchased paper. Thus, to solve this issue the company should use the division manager method to allocate the OH cost for the formed and the purchased paper. We can take the total OH cost (depot and division) and divide them by the total number of units (formed and purchased) and that will give us a fair OH cost per unit than we can add the direct labor cost to this stander and then calculate the total unit cost per each type of …show more content…
On the other hand, buying the causal paper or the paper from the public contributes to a high labor cost. As stated in the case, the workers in 1980 get paid at a very high rate which means the company should work on cutting off the labor cost by reducing the work hours or reducing the number of workers. That can only be done if the company focused more on buying the paper from the dealers more than buying them from the