Fiberform Industries produces a line of motorboats. The assembly department prog
ID: 2428230 • Letter: F
Question
Fiberform Industries produces a line of motorboats. The assembly department programs computerized equiptment to shape and bend the metal railings for each boat. This equipment is capable of producing 40 railings per hour. The department typically produces onlu 30 railings per hour. The plant operates two (8 hour) shifts, 6 days a week. The shape and bend of the railings are critical, and the firm currently discards 9,600 completed railings a year because of poor shape and bend. The plant is closed for 12 vacation days and 10 holidays per year. The equipment is also shut down for one day every 2 months for regular maintenance. The assembly department's average production of good railings for the past 5 years is 130,000 a year. The department is expected to produce 120,000 good boat railings this year. However, the actual production was 105,000 railings. For this problem, assume the 365th day is Sunday. Further assume any difference between actual sales and production under current conditions is idle marketable capacity
REQUIRED:
a. Assume that the total equipment-related cost for the assemble department was $2,400,000. Determine the colume and capacity cost for each of the following tradional measures: (i) theoretical (ii) normal (iii)budget; and (iv) actual.
b. Using the CAM-I model, determine the amount of equipment time that falls into each of the following categories: (i) rated (ii) idle (iii) non-productive (iv) productive. As part of your solution attempt to determine what types of idle and non-productive capacity exists. (Note: you may have to back inot one type of idle capacity)
c. Assume that the equipment used in the plant rents for $1,200,000 a year. In addition, there is a daily cost of $1,000 whether or not the plant operates. An additional $835,000 of cost is incurred on the days the plant is operating or undergoing maintenance. Estimate the cost that should be assigned for : (i) idle (ii) non-productive (iii) productive capacity.
Explanation / Answer
Shifts in a day 2 hours in shift 8 hrs working hours in a day 8*2 16 hours Calculation of number of working days Total days 365 days plant closed for vacations 12 days holidays 10 days shutdown 1 day for every 2 months 6days Total days 28 days Net work days 365-28 337 days Total no.of hours worked 337*16 5392 hours standard production per hour 40 units standard production for 5392 hours 215680 Actual production per hour 30 units Actual production in 5392 hours 161760 cost of assemble deparment $2,400,000 1.theoretical: production units 215680 cost per unit =2400000/215680 $11.12 2.Normal production units 161760 cost per unit =2400000/161760 $14.83 Budgeted units 120000 budgeted cost per unit=2400000/120000 $20 Actual units 105000 Actual cost per unit=2400000/105000 $22.85 c. plant rent $1,200,000 Additional cost @$1000 per day for 337days $337,000 Additional cost when plant is operated $835,000 Total cost to be assigned $2,372,000
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