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provide an analysis of the data that will assist the management of Hall Company in determining whether or not the increase in production rates is having a favorable impact on production costs. considering the following. Part 1: Have you adequately explained the data provided as it pertains to production rates? Part 2: Have you explained how the data impacts production costs?
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Decision Making Using Process Cost Data
Hall Company produces synthetic materials from a chemical extrusion process. Management has
been concerned that material costs per pound are too high. Hall produces only a single product
on four separate extrusion lines. The product is processed over two shifts per day. The following
data have been collected for analysis:
January
Total materials costs
Total number of pounds produced
Cost per pound
$335,050
50,400
$6.65
Shift 1 …………………………. .
Shift 2 ………………………….
Total……………………………. .
Materials Costs by Production Line
Line 1
Line 2
Line 3
$36,000
$36,000
$40,300
45,500
45,500
50,250
$81,500
$81,500
$90,550
Line 4
$36,000
45,500
$81,500
Total
$148,300
186,750
$335,050
Shift 1 ………………………….
Shift 2 ………………………….
Total…………………………….
Pounds Produced by Production Line
Line 1
Line 2
Line 3
6,000
6,000
6,200
6,500
6,500
6,700
12,500
12,500
12,900
Line 4
6,000
6,500
12,500
Total
24,200
26,200
50,400
Assume you have interviewed the following individuals in an attempt to discover the problems
causing material costs to be inflated: Juanita Marcos, shift 1 supervisor; Ed Curcek, shift 2
supervisor; and Hal Bundy, plant manager. A summary of their responses are given below.
Hal: I just received a directive from headquarters to increase my production rates. I talked to Ed
and Juanita about kicking up our production from our old average of 6,000 pounds per shift.
Juanita did not seem to think that this was a good idea. My bet is that our problems are with
Juanita’s shift.
Juanita: I have decided to keep first-shift production on Lines 1, 2, and 4 at 6,000 pounds per
shift. That’s because I remember the last time we had our production rates increased. Our
materials consumption shot through the roof. Therefore, I’m running a small experiment on Line
3 before increasing the speeds across the whole shift. I know Ed has increased production on the
second shift, but he was just brought in from another plant that has new machinery. I don’t expect
he’s had the historical experience with these older machines that I’ve had.
Ed: I’ve increased production rates on my shift, but it’s hard to tell how things are going. I thought
the new directive made plenty of sense. Back at my previous plant location, we ran machines at
7,000 pounds per shift without any trouble. These older machines don’t seem to be running nearly
as well as the machines back at my old place. I guess when we see the numbers at the end of
the month we’ll have a good feel for it.
Assignment: Provide an analysis of the data that will assist the management of Hall
Company in determining whether or not the increase in production rates is having a
favorable impact on production costs.
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