Roedel Electronics produces a variety of electrical components, including a remo

Question

Roedel Electronics produces a variety of electrical components, including a remote control for televisions and a remote control for DVD players. Each remote control consists of three subassemblies that are manufactured by Roedel: a base, a cartridge, and a keypad. Both remote controls use the same base subassembly, but different cartridge and keypad subassemblies.

Roedel's sales forecast indicates that 7000 TV remote controls and 5000 DVD remote controls will be needed to satisfy demand during the upcoming Christmas season. Because only 500 hours of in-house manufacturing time are available, Roedel is considering purchasing some, or all, of the subassemblies from outside suppliers. If Roedel manufactures a subassembly in-house, it incurs a fixed setup cost as well as a variable manufacturing cost. The following table shows the setup cost, the manufacturing time per subassembly, the manufacturing cost per subassembly, and the cost to purchase each of the subassemblies from an outside supplier:

a. Determine how many units of each subassembly Roedel should manufacture and how many units Roedel should purchase. ANSWERS IN VALUE BOXES.

What is the total manufacturing and purchase cost associated with your recommendation?

$ ______________

b. Suppose Roedel is considering purchasing new machinery to produce DVD cartridges. For the new machinery, the setup cost is $3000; the manufacturing time is 2.5 minutes per cartridge, and the manufacturing cost is $2.60 per cartridge. Assuming that the new machinery is purchased, determine how many units of each subassembly Roedel should manufacture and how many units of each subassembly Roedel should purchase.

What is the total manufacturing and purchase cost associated with your recommendation?

$ ______________

Subassembly Setup
Cost($) Manufacturing
Time per Unit(min.) Manufacturing
Cost per Unit($) Purchase Cost
per Unit($) Base 1000 0.9 0.40 0.65 TV cartridge 1200 2.2 2.90 3.45 DVD cartridge 1900 3.0 3.15 3.70 TV keypad 1500 0.8 0.30 0.50 DVD keypad 1500 1.0 0.55 0.70

Explanation / Answer

Solution : (a) Calculation of Purchase cost and manufacturing cost: Note: No. of base is 7000+5000= 12000 Subassembly Setup Manufacturing Purchase Cost Cost($) Cost per Unit($) Mfg. cost Total cost of mfg per Unit($) total pur. Cost (i) Base 1000 0.4 4800 5800 0.65 7800 (ii) TV cartridge 1200 2.9 20300 21500 3.45 24150 (iii) DVD cartridge 1900 3.15 15750 17650 3.7 18500 (iv) TV keypad 1500 0.3 2100 3600 0.5 3500 (v) DVD keypad 1500 0.55 2750 4250 0.7 3500 As no (iv) & (v) is having higher manufacturing cost so purchase them For remaining Time (min.) Total cost of mfg total pur. Cost Saving in mfg over purchase Total time (time*units)/60 Saving per hour rank (i) Base 0.9 5800 7800 2000 180 11.11 1 (ii) TV cartridge 2.2 21500 24150 2650 256.67 10.32 2 (iii) DVD cartridge 3 17650 18500 850 250 3.40 3 As we are having 500 hours and manufacturing (i) and (ii) fully then balance hours used to manfacture (iii) Balance hours = 500 -180-256.67 = 63.33 Now for (iii) mgf time (min) hours minutes No of units mfg Balance to be purchased 3 63.33 3799.8 1266 3734 Variable names Value COST No. of bases manufactured 12000 5800 No. of bases purchased 0 0 No. of TV cartridges made 7000 21500 No. of TV cartridges purchased 0 0 No. of DVD cartridge made 1266 5887.9 No. of DVD cartridge purchased 3734 13815.8 No. of TV keypads made 0 0 No. of TV keypads purchased 7000 3600 No. of DVD keypads made 0 0 No. of DVD keypads purchased 5000 4250 Total 54853.7 (b) As new machine for dvd cat. Is already purchased for $3000 so its sunk cost and not included in total cost for dvd cat. Subassembly Setup Manufacturing Purchase Cost Cost($) Cost per Unit($) Mfg. cost Total cost of mfg per Unit($) total pur. Cost (i) Base 1000 0.4 4800 5800 0.65 7800 (ii) TV cartridge 1200 2.9 20300 21500 3.45 24150 (iii) DVD cartridge 3000 2.6 13000 13000 3.7 18500 (iv) TV keypad 1500 0.3 2100 3600 0.5 3500 (v) DVD keypad 1500 0.55 2750 4250 0.7 3500 As no (iv) & (v) is having higher manufacturing cost so purchase them For remaining Time (min.) Total cost of mfg total pur. Cost Saving in mfg over purchase Total time (time*units)/60 Saving per hour rank (i) Base 0.9 5800 7800 2000 180 11.11 2 (ii) TV cartridge 2.2 21500 24150 2650 256.67 10.32 3 (iii) DVD cartridge 2.5 13000 18500 5500 208.33 26.40 1 As we are having 500 hours and manufacturing (iii) and (i) fully then balance hours used to manfacture (ii) Balance hours = 500-208.33-180 = 111.67 Now for (ii) mgf time (min) hours minutes No of units mfg Balance to be purchased 2.22 111.67 6700.2 3018 3982 Answer Variable names Value COST No. of bases manufactured 12000 5800 No. of bases purchased 0 0 No. of TV cartridges made 3018 9952.2 No. of TV cartridges purchased 3982 13737.9 No. of DVD cartridge made 5000 16000 No. of DVD cartridge purchased 0 0 No. of TV keypads made 0 0 No. of TV keypads purchased 7000 3600 No. of DVD keypads made 0 0 No. of DVD keypads purchased 5000 4250 Total 53340.1

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