Huron Automative Case

1 Costing of a 100-unit batch of CS-29 carburetors:

Labor rate First proposal

Department Hours Hours (%) per hour Overhead Rate Total
Casting / Stamping 21 17% $21.60 $31.37 $52.97 $1,112
Grinding 12 10% 18.00 30.14 48.14 $578
Machining 58 46% 25.00 62.52 87.52 $5,076
Assembly 35 28% 19.00 21.19 40.19 $1,407
Total (Proposed) 126 100% $8,173
Total (Present) 126 $55.96 $7,051
Difference $1,122
Difference (%) 16%

2 Costing of spare parts for inventory:

Labor rate First proposal

Department Hours Hours (%) per hour Overhead Rate Total

Casting / Stamping 304 18% $21.60 $31.37 $52.97 $16,102.9

Grinding 270 16% 18.00 30.14 48.14 12,997.8
Machining 1,115 66% 25.00 62.52 87.52 97,584.8
Total (Proposed) 1,689 100% $126,685.5
Total (Present) 1,689 $55.96 $94,516.4
Difference 32,169.0
Difference (%) 34%

3 Costing of work done for other divisions:

Labor rate First proposal
Department Hours Hours (%) per hour Overhead Rate Total

Casting / Stamping 674 20% $21.60 $31.37 $52.97 $35,701.8

Grinding 540 16% 18.00 30.14 48.14 25,995.6
Machining 2,158 64% 25.00 62.52 87.52 188,868.2
Total (Proposed) 3,372 100% $250,565.5
Total (Present) 3,372 $55.96 $188,697.1
Difference 61,868.4
Difference (%) 33%
Aman Kumar Jha
 Revised proposal
Overhead Rate Total
$31.52 $53.12 $1,115.5
28.75 46.75 561.0
61.50 86.50 5,017.0
20.14 39.14 1,369.9
$8,063.4
$55.96 $7,051.0
1,012.5
14%

Revised proposal
Overhead Rate Total

$31.52 $53.12 $16,148.5

28.75 46.75 12,622.5
61.50 86.50 96,447.5
$125,218.5
$55.96 $94,516.4
30,702.0
32%

Revised proposal
Overhead Rate Total

$31.52 $53.12 $35,802.9

28.75 46.75 25,245.0
61.50 86.50 186,667.0
$247,714.9
$55.96 $188,697.1
59,017.8
31%
 Q3.a
Present Method
S. No.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16

Q3.b
1st Proposed Method
Custom Work
Custom Overhead/ Hr 40.48
Labor Hours 3712.00
Total Overhead 150261.76
Additional Overhead with new machine 2158.81
New Overhead Cost 152420.57
Reduced Labor hours 2598.40
Revised Overhead/Hr 58.66
Labor Rate/Hour 22.00
Total Cost/Hour 80.66

Q3.c
Total Cost under present method 207723.52
Total Cost/Hr with new machine under present method 148836.35
Decrease in Cost (in Dollars) 58887.17
Reduction (in %) 28.35%

Total Cost under present method 207723.52

Total Cost/Hr with new machine under 1st proposed method 209585.37
Increase in Cost(in Dollars) 1861.85
Increase (in %) 0.90%

Total Cost/Hr under 1st proposed method 231925.76

Total Cost/Hr with new machine under 1st proposed method 209585.37
Decrease in Cost(in Dollars) 22340.39
Decrease (in %) 9.63%
New machine cost 400000
Useful Life 5
Depreciation per month 6666.6666667

Labor Cost Hours

Casting/Stamping 54604.00 2528.00
Grinding 38520.00 2140.00
Machining 191876.00 7675.00
Custom Work
Labor Cost 81664.00 3712.00
Less: Labor Cost & Hour 24499.20 1113.60
Reduced Labor Cost & Hour (5-6) 57164.80 2598.40
Assembly 291784.00 15357.00
Total Labor 658448.00 31412.00
Less: Total Labor Cost 24499.20 1113.60
Reduced Total Labor Cost & Hour (9-10) 633948.80 30298.40
Overhead 1099323.00
Add: Depreciation 6666.67
Less: Var Cost 4507.85
New Overhead (12+13-14) 1101481.81
Total Labor and Overhead (11+15) 1735430.61 30298.40
New Plant Hourly Rate 57.28

Hourly Rate
Current Method 55.96
After new machine 80.659395731
Increase
Increase (%)

Hourly Rate
Before new machine 62.48
After new machine 80.659395731
Decrease
Decrease (%)
 Custom Work Cost

Hourly Rate Labor Hour Cost

Before new machine 55.96 3712.00 207723.52
After new machine 57.28 2598.40 148836.35
Decrease 58887.17
Decrease (%) 28.35%

Labor Hour Cost

3712.00 207723.52
2598.40 209585.373866667
1861.8538666667
0.90%

Labor Hour Cost

3712.00 231925.76
2598.40 209585.373866667
22340.3861333333
9.63%