Case 18-1 Huron

Case 18-1 Huron Automotive Company

Question 1
1. the present method:
The cost = DLH*hourly rate = DHL*55.96
2. the first proposed method:
The cost=∑(each department’s DHL* departmental total cost hourly rate) total cost hourly rate = labor rate per hour +overhead per hour
3. the revised proposed method:
The cost =∑(each department’s DHL* departmental total cost hourly rate) total cost hourly rate = labor rate per hour +overhead per hour the overhead per hour is calculated at normal volume | CS-29 injectors (per batch of 100) | Spare parts for inventory (per typical month) | work for other divisions (per typical month) | the present method | $ 7,050.96 | $ 94,516.44 | $ 188,697.12 | the first proposal | $ 8,172.86 | $ 126,685.5 | $ 250,565.5 | the revised proposal | $ 8,063.42 | $ 125,218.5 | $ 247,714.9 |

Question 2
1. The differences among the methods are significant
a. The calculation of the costs, cost control
b. The charges to outside departments
c. Judging departmental performance
d. The pricing for the products and service
e. The ability to compete in the market
2. The reasons for the differences
a. The choice about the cost center
b. The bases for the estimation

Question 3(a)
The new hourly rate is showed below: | Labor: | Overhead: | Hours: | Casting/stamping | $54,604 | $88,480 | 2,528 | Grinding | 38,520 | 79,900 | 2,140 | Machining | 191,876 | 268,625 | 7,675 | Custom work | 57,165= 81664*0.7 | 132,690 = 35*3712*(1-0.1*0.3)+400000/(5*12) | 2,599 = 3712*0.7 | Assembly | 291,784 | 537,495 | 15,357 | TOTAL | 633,949 | 1,107,190 | 30,299 | Total labor and overhead | $1,741,139 | | New hourly rate = 1,741,139/30299 = $57.46 |

The costs for the custom work department in July :
1. new rate:
57.46*3712*0.7=$149,304
2. the former rate:
55.96*3712=$207,724

Question 3(b)
If the first proposed method is applied to the