Date Job No. Product Quantity Amount
Jan. 2 1 TT 520 $16,120
Jan. 15 22 SS 1,610 20,125
Feb. 3 30 SS 1,420 25,560
Mar. 7 41 TT 670 15,075
Mar. 24 49 SLK 2,210 22,100
May 19 58 SLK 2,550 31,875
June 12 65 TT 620 10,540
Aug. 18 78 SLK 3,110 48,205
Sept. 2 82 SS 1,210 16,940
Nov. 14 92 TT 750 8,250
Dec. 12 98 SLK 2,700 52,650
a. Develop a graph for each product (three graphs), with Job Number (in date order) on the horizontal axis and Unit Cost on the vertical axis. Use this information to determine Alvarez Manufacturing Inc.’s cost performance over time for the three products.
b. What additional information would you require in order to investigate Alvarez Manufacturing Inc.’s cost performance more precisely?
Answer:
a. Unit
Date Job. No. Quantity Product Amount Cost
Jan. 2 1 520 TT $16,120 $31.00
Jan. 15 22 1,610 SS 20,125 $12.50
Feb. 3 30 1,420 SS 25,560 $18.00
Mar. 7 41 670 TT 15,075 $22.50
Mar. 24 49 2,210 SLK 22,100 $10.00
May 19 58 2,550 SLK 31,875 $12.50
June 12 65 620 TT 10,540 $17.00
Aug. 18 78 3,110 SLK 48,205 $15.50
Sept. 2 82 1,210 SS 16,940 $14.00
Nov. 14 92 750 TT 8,250 $11.00
Dec. 12 98 2,700 SLK 52,650 $19.50
As can be seen, the unit costs behave differently for each product. SLK has increasing unit costs during the year, SS is steady, and TT has decreasing unit costs during the year.
b. Management should want to determine why SLK costs are increasing and why TT costs are decreasing. This information can be determined from the job cost sheets for each job. By comparing the cost sheets from job to job (for a particular product), management can isolate the cause of the cost changes. The cost sheets will show how materials, labor, and overhead are consumed across the production process for each job. This information can isolate the problem or opportunity areas.