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$ Chad Davis, C&C Sports’ vice president for operations, recently received a sal

ID: 2481779 • Letter: #

Question

$ Chad Davis, C&C Sports’ vice president for operations, recently received a sales brochure for a new electric cutting tool. Based on the tool’s specifications, Chad believes that C&C Sports could increase the batch size on jersey production to 50 jerseys, up from the current 35 jerseys. While the cutting tool would be used on pants and award jackets as well, other production factors prevent increasing the batch sizes for these products. The new tool would increase annual operating costs by $14,082. Before deciding whether to purchase the cutting tool, Chad wants to know how the new tool will affect the cost of producing the company’s three products.

 Budgeted
production Units per
Batch Cut per
Batch Pants 183,500 50 4 Jerseys 66,500 35 5 Jackets 18,000 5 9




Explanation / Answer

Part A Answer:

Total Annual Cost= $ 14082 + (183500*50*4) + (66500*35*5) + (18000*5*9) = 14082 + 36700000 + 11637500 + 810000

= $49161582

Part B Answer:

No of Cuts = 50*4 + 35 *5 + 5*9= 420

Cost per Cut = $ 49161582/ 420 = $ 117051.385

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