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Question

1. Given the following data for Alberts fabricating production area:

Fixed costs for one shift = $60,000

Unit variable cost = $7

Number of machines = 6

Number of working days in year = 340

Processing time per unit = 40 minutes

Assume a breakeven volume of 12,000 units

a. What is the annual capacity with a single 8-hour shift?

b. What is the capacity with two shifts?

c. What is the break-even volume with a single-shift operation?

d. What is the maximum revenue with a single shift?

e. What is the break-even volume with a two-shift operation?

A.The annual capacity with a single 8-hour shift is

Number of working days in year = 340days/year

Number of machines = 6

single hour shift = 8 hours/shift

Processing time per unit = 60/40 (hours/unit)

so, 340(days/year)*6 machines*8(hours/shift)*60/40 (hours/unit)

24480 (units/shifts)

B. The capacity with two shifts is 2* 24480 (units/shifts)

48960 (units/shifts)

C.The break-even volume with a single-shift operation is

Q*=Fixed Cost/Variable cost

= 60,000/7

= 8,572 units

D.The maximum revenue with a single shift is $ 24480

E.The break-even volume with a two-shift operation is 2*sinlge shift

= 2* 8572

= 17,144 units

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