Question

Northern Illinois Manufacturing reported the following results from last year’s operations: Sales (1,325,000 units) $ 15,900,000...

Northern Illinois Manufacturing reported the following results from last year’s operations:

Sales (1,325,000 units)

$ 15,900,000

Variable Expenses:

   Direct Materials

1,801,800

   Direct Labor

5,450,580

   Manufacturing OH

2,053,750

   S & A

2,112,000

   Total Variable

11,418,130

Contribution Margin

4,481,870

Fixed Expenses

   Manufacturing OH

757,700

   S & A

1,136,800

   Total Fixed

1,894,500

Net Operating Income

$ 2,587,370

Total operating assets at the end of the year are $20,700,000. The total operating assets at the end of last year was $19,800,000.

The company tracks its internal business process performance and reports the following data for this year:

Inspection time

0.6 days

Wait time (from order to start of production)

14.5 days

Process time

3.7 days

Move time

1.7 days

Queue time

4.3 days

Budgeted information for Northern Illinois is based on the following information:

           

Sales – Units

1,300,000

Sales Price

$12 per unit

Direct materials

$1.50 per unit

Direct labor

$3.60 per unit

Variable OH

$1.50 per unit

Variable S & A

$1.60 per unit

Fixed OH

$750,000

Fixed S & A

$1,125,000

The following standard cost card is for the variable manufacturing for one unit of production:

Std Quantity

Std Price

Std Cost

Direct materials

2.00 lbs

0.75 per pound

1.50

Direct labor

0.20 hrs

18.00 per hour

3.60

Variable OH

1.50 per unit

1.50

During the year, the company purchased and used 2,772,000 pounds of material. The company worked 302,810 hours at a rate of $18 per hour.

The company’s minimum return is 10%.

This assignment requires several items to be completed using an Excel spreadsheet. Please prepare the items in the order given with the number of the requirement or your Excel spreadsheet.

1. Determine the ROI and RI for last year.

2. Determine last year’s throughput time, MCE, and delivery cycle time.

Please complete in excel.

Homework Answers

Answer #1
1 ROI=Net operating income/Average operating assets
Average operating assets=(Operating assets at the end of last year+erating assets at the end of the year)/2=(19800000+20700000)/2=$ 20250000
ROI=2587370/20250000=0.12777=12.78%
RI=Net operating income-(Average operating assets*Minimum return)=2587370-(20250000*10%)=$ 562370
2 Throughput time=Process time+Inspection time+Move time+Queue time=3.7+0.6+1.7+4.3=10.3 days
Manufacturing cycle efficiency (MCE)=Process time/Throughput time=3.7/10.3=0.3592=35.92%
Delivery cycle time=Wait time+Throughput time=14.5+10.3=24.8 days
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