Question: Cost Assignment And JIT Bunker Company Produces Two Types Of Glucose Monitors (basic And Advanced). Both Pass Through Two Producing Departments: Fabrication And Assembly. Bunker Also Has An Inspection Department That Is Responsible For Testing Monitors To Ensure That They Perform Within Prespecified Tolerance Ranges (a Sampling Procedure Is Used). Budgeted …

Cost Assignment and JIT
Bunker Company produces two types of glucose monitors (basic and
advanced). Both pass through two producing departments: Fabrication
and Assembly. Bunker also has an Inspection Department that is
responsible for testing monitors to ensure that they perform within
prespecified tolerance ranges (a sampling procedure is used).
Budgeted data for the three departments are as follows:

Inspection
Fabrication
Assembly

Overhead
$720,000
$1,080,000   
$306,000  

Number of tests
—
45,000   
135,000  

Direct labor hours
—
108,000   
54,000  

In the Fabrication Department, the basic model requires 1.2
hour(s) of direct labor and the advanced model requires 2.4
hour(s). In the Assembly Department, the basic model requires 1.4
hour(s) of direct labor and the advanced model requires 2.65 hours.
There are 67,500 basic units produced and 36,000 advanced
units.
Immediately after preparing the budgeted data, a consultant
suggests that two manufacturing cells be created: one for the
manufacture of the basic model and the other for the manufacture of
the advanced model. Raw materials would be delivered to each cell,
and goods would be shipped immediately to customers upon
completion. Workers within each cell would also be trained to
perform monitor testing. The total direct overhead costs estimated
for each cell would be $342,000 for the basic cell and $1,080,000
for the advanced cell.
Required:
1. Allocate the inspection costs to each
department.

Fabrication
$fill in the blank 1

Assembly
$fill in the blank 2

Compute the overhead cost per unit for each monitor. Overhead
rates use direct labor hours. Round your intermediate calculations
and final answers to the nearest cent.

Basic
$fill in the blank 3 per unit

Advanced
$fill in the blank 4 per unit

2. Compute the overhead cost per unit if
manufacturing cells are created. If required, round your
intermediate calculations and final answers to the nearest
cent.

Basic
$fill in the blank 5 per unit

Advanced
$fill in the blank 6 per unit

Which unit overhead cost do you think is more accurate—the one
computed with a departmental structure, or the one computed using a
cell structure?