Venus Computer can produce 23,000 personal computersa year on its daytime shift.

Question

Venus Computer can produce 23,000 personal computersa year on its daytime shift. The fixed manufacturing costs per yearare $2million and the total labor cost is $9,109,000. To increaseits production to 46,000 computers per year, Venus is consideringadding a second shift. The Unit labor cost for the second shiftwould be 25% higher then the day shift, but the total fixedmanufacturing costs would increase only to $2.4 million from $2million. (a) Compute the unit manufacturing cost for the daytime shift. (b) would adding a second shift increase or decrease the unitmanufacturing cost at the plant? What is the unit manufacturing cost for the daytime shift? What is the unit cost after adding the second shift?

Explanation / Answer

(a) Manufacturing Cost for the daytime shifts: Total cost = Manufacturing cost + labor cost = 2,000,000+9,109,000 = 11,109,000 Unit Cost when 23000 computers produced = = 11,109,000 23,000 = 483 If considering only the manufacturing cost then = Manufacturing cost No. of products = 2 million 23000 = $87 (b) Adding a second shift would decrease the unit manufacturing cost at the plant Explanation: Unit Cost when 46000 computers produced = = 13,786,250 46,000 = $300 If considering only the manufacturing cost then = Manufacturing cost No. of products = 2.4 million 46000 = $52

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