Cycle Time, Velocity, Product Costing
1. What are the theoretical velocity and cycle time for the moped production cell at Mulhall, Inc.? 2. How do the actual velocity and cycle time compare to the theoretical values? 3. What is the efficiency of the operation, as indicated by MCE? 4. How do the budgeted conversion cost per minute and actual conversion cost per model compare?
1. The theoretical velocity of the moped production cell at Mulhall, Inc. can be calculated by dividing the theoretical output by the cell time. The theoretical output is 28,560 models, and the cell time is 38,080 hours. Therefore, the theoretical velocity is 28,560 / 38,080 = 0.75 models per hour. To calculate the theoretical cycle time, we divide the cell time by the theoretical velocity. The cell time is 38,080 hours and the theoretical velocity is 0.75 models per hour, so the theoretical cycle time is 38,080 / 0.75 = 80 minutes per model. 2. The actual velocity is determined by dividing the actual output by the actual cell time. In this case, the actual output is 23,800 models, and the actual cell time is 38,080 hours. Therefore, the actual velocity is 23,800 / 38,080 ≈ 0.625 models per hour. The actual cycle time can be calculated by dividing the actual cell time by the actual output. With the actual cell time at 38,080 hours and actual output at 23,800 models, the actual cycle time is 38,080 / 23,800 ≈ 1.600 minutes per model. 3. MCE, or Manufacturing Cycle Efficiency, is calculated by dividing the theoretical velocity by the actual velocity and then multiplying by 100 to get a percentage. In this case, the theoretical velocity is 0.75 and the actual velocity is 0.625. Therefore, MCE = (0.625 / 0.75) * 100 ≈ 83.33%, indicating a very high efficiency in the operation. 4. To compute the budgeted conversion cost per minute, we divide the budgeted conversion costs ($6,168,960) by the cell time in minutes (38,080 hours x 60 minutes). This gives us a conversion cost per minute of $6,168,960 / (38,080 x 60) ≈ $2.68 per minute. Using this rate, we can calculate the conversion cost per model if theoretical output is achieved by multiplying the conversion cost per minute by the theoretical cycle time of 80 minutes per model, which results in $2.68 x 80 = $214.40 per model. For the actual output, the conversion cost per model can be determined by dividing the actual conversion costs ($6,168,960) by the actual output of 23,800 models, giving us $6,168,960 / 23,800 ≈ $258.95 per model.
Theoretical Velocity and Cycle Time
Theoretical Velocity: The theoretical velocity of the moped production cell at Mulhall, Inc. is 0.75 models per hour, and the theoretical cycle time is 80 minutes per model.
Comparison with Actual Values
Actual Velocity: The actual velocity is 0.625 models per hour, and the actual cycle time is 1.600 minutes per model. This indicates that the actual production is slightly slower than the theoretical values.
Efficiency Evaluation
MCE: With an MCE of approximately 83.33%, the operation at Mulhall, Inc. demonstrates a very high level of efficiency in utilizing its resources to produce moped models.
Cost Comparison
Budgeted Conversion Cost per Minute: The budgeted conversion cost per minute is approximately $2.68, leading to a conversion cost per model of $214.40 for theoretical output and $258.95 for actual output. This comparison highlights a discrepancy between the budgeted and actual costs per model.