Roedel Electronics produces tablet computer accessories, including integrated ke
ID: 363660 • Letter: R
Question
Roedel Electronics produces tablet computer accessories, including integrated keyboard tablet stands that connect a keyboard to a tablet device and hold the device at a preferred angle for easy viewing and typing. Roedel produces two different sizes of integrated keyboard tablet stands, a small and a large size. Each size uses the same keyboard attachment, but the stand consists of two different pieces, a top flap and a vertical stand that differ by size. Thus, a completed integrated keyboard tablet stand consists of three subassemblies that are manufactured by Roedel: a keyboard, a top flap and a vertical stand.
Roedel's sales forecast indicates that 7000 small integrated keyboard tablet stands and 5000 large integrated keyboard tablet stands 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:
Manufacturing Subassembly Setup Cost ($) Time per Unit (min.) Cost per Unit ($) Purchase Cost per Unit ($) Keyboard 1,000 0.9 0.40 0.65 Small top flap 1,200 2.2 2.90 3.45 Large top flap 1,900 3.0 3.15 3.70 Small vertical stand 1,500 0.8 0.30 0.50 Large vertical stand 1,500 1.0 0.55 0.70Explanation / Answer
Information Available:
For this, let us calculate the costs
Part Total Manufacturing Cost Cost associated with Purchasing
Setup Cost + (Cost per unit * No of units) (Purchase Cost per unit * No of units)
Keyboard 1000 + (0.40*12000) = 5,800$ 0.65*12000 = 7,800$
Small Top Flap 1200 + (2.90*7000) = 21,500$ 3.45*7000 = 24,150$
Large Top Flap 1900 + (3.15*5000) = 17,650$ 3.70*5000 = 18,500$
Small Vertical Stand 1500 + (0.30*7000) = 3,600$ 0.50*7000 = 3,500$
Large Vertical Stand 1500 + (0.55*5000) = 4,250$ 0.70*5000 = 3,500$
Hence, it is clear that Purchasing – Small & Large Vertical Stand is a profitable decision
Now, to decide manufacturing based on cost & time available
Part Total Time required
Keyboard 0.9*12000 = 10,800 min
Small Top Flap 2.2 * 7000 = 15,400 min
Large Top Flap 3.0 * 5000 = 15,000 min
Total time available = 500 hrs = 500*60 = 30,000 mins
Based on cost calculation, the maximum cost differential is in purchasing Keyboard (7800 – 5800 = 2000$) & Small Top Flap (24,150 – 21,500 = 2650$) and manufacturing this would take a total of 15400 + 10800 = 26200 mins out of 30000 mins available
Therefore, Items to be Purchased are “Small Vertical Stand”, “Large Vertical Stand” & “Large top flap” and, Items to be manufactured are “Keyboard” & “Small top flap” which results in total cost incurred to be = 52,800$ (5,800 + 21,500 + 18,500 + 3,500 + 3,500)
Variable names
Value
No. of Keyboard manufactured
12000
No. of Keyboard purchased
0
No. of Small top flap made
7000
No. of Small top flap purchased
0
No. of Large top flap made
0
No. of Large top flap cartridge purchased
5000
No. of Small vertical stand made
0
No. of Small vertical stand purchased
7000
No. of Large vertical stand made
0
No. of Large vertical stand purchased
5000
For this, let us re-calculate the costs
Part Total Manufacturing Cost Cost associated with Purchasing
Setup Cost + (Cost per unit * No of units) (Purchase Cost per unit * No of units)
Keyboard 1000 + (0.40*12000) = 5,800$ 0.65*12000 =
Small Top Flap 1200 + (2.90*7000) = 21,500$ 3.45*7000 =
Large Top Flap 3000 + (2.6*5000) = 16,000$ 3.70*5000 =
Small Vertical Stand 1500 + (0.30*7000) = 3,600$ 0.50*7000 = 3,500$
Large Vertical Stand 1500 + (0.55*5000) = 4,250$ 0.70*5000 = 3,500$
Hence, it is clear that Purchasing – Small & Large Vertical Stand is a profitable decision
Now, to decide manufacturing based on cost & time available
Part Total Time required
Keyboard 0.9 * 12000 = 10,800 min
Small Top Flap 2.2 * 7000 = 15,400 min
Large Top Flap 2.5 * 5000 = 12,500 min
Total time available = 500 hrs = 500*60 = 30,000 mins
Based on cost calculation, the maximum cost differential is in purchasing Small Top Flap (24,150 – 21,500 = 2650$) & Large top Flap (18500 – 16000 = 1500$) and manufacturing this would take a total of 15400 + 12500 = 27900 mins out of 30000 mins available
Therefore, Items to be Purchased are “Small Vertical Stand”, “Large Vertical Stand” & “Keyboard” and, Items to be manufactured are “Large top flap” & “Small top flap” which results in total cost incurred to be = 52,300$ (7,800 + 21,500 + 16,000 + 3,500 + 3,500)
Variable names
Value
No. of Keyboard manufactured
0
No. of Keyboard purchased
12000
No. of Small top flap made
7000
No. of Small top flap purchased
0
No. of Large top flap made
5000
No. of Large top flap cartridge purchased
0
No. of Small vertical stand made
0
No. of Small vertical stand purchased
7000
No. of Large vertical stand made
0
No. of Large vertical stand purchased
5000
Variable names
Value
No. of Keyboard manufactured
12000
No. of Keyboard purchased
0
No. of Small top flap made
7000
No. of Small top flap purchased
0
No. of Large top flap made
0
No. of Large top flap cartridge purchased
5000
No. of Small vertical stand made
0
No. of Small vertical stand purchased
7000
No. of Large vertical stand made
0
No. of Large vertical stand purchased
5000
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