Problem 10-18 A production process consists of a three-step operation. The scrap

Question

Problem 10-18

A production process consists of a three-step operation. The scrap rate is 15 percent for the first step and 8 percent for the other two steps.

If the desired daily output is 470 units, how many units must be started to allow for loss due to scrap?(Do not round intermediate calculations. Round up your final answer to the next whole number.)

If the scrap rate for each step could be cut in half at every operation, how many units would this save in terms of the scrap allowance? (Do not round intermediate calculations. Round up your final answer to the next whole number.)

If the scrap represents a cost of $10 per unit, how much is it costing the company per day for the original scrap rate (i.e. the Part a scrap rate)? (Round your final answer to the nearest whole number. Omit the "$" sign in your response.)

A production process consists of a three-step operation. The scrap rate is 15 percent for the first step and 8 percent for the other two steps.

Explanation / Answer

a.

Start with 1000 units.
1000 x (100% - 15%) = 850 units after the first step
850 x (100% - 8%) = 782 units after the second step
782 x (100% - 8%) = 719 units after the third step

470 x (1000 / 719) = 653.68 = 654 units to start with

b.
Start with another 1000 units:
1000 x (100% - 7.5%) = 925 units after the first step
925 x (100% - 4%) = 888 units after the second step
888 x (100% - 4%) = 852.48 units after the third step
470 x (1000 / 852.48) = 551.332 = 551 units to start with under the improved procedure

654 - 551 = 103 units saved

c.
(654 - 470) units x $10 = $1840 daily cost in scrapped units

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