1. The unit costs ($) for manufacturing a component for a washing machine are as follows: Direct labor: 20; direct materials: $5; indirect labor and materials: 20% of direct labor; fixed and administrative costs: 30; selling costs: 10. a) Assuming a 90% first-pass yield, what should the unit selling price be if the manufacturer desires a 20% profit margin for conforming product? b) The manufacturer has identified a secondary market for the nonconforming products, that they can sell at $75/unit. Conforming product they wish to sell at 30% above costs. What is the expected profit per unit sold if the company has the same first-pass yield as in part a)? c) If the company improves its first-pass yield to 98%, what is the expected profit per unit sold, assuming other conditions are as stated in part b)?
Answer all parts of the question
1. The unit costs ($) for manufacturing a component for a washing machine are as follows: Direct labor: 20; direct materials: $5; indirect labor and materials: 20% of direct labor; fixed and administrative costs: 30; selling costs: 10.
a) Assuming a 90% first-pass yield, what should the unit selling price be if the manufacturer desires a 20% profit margin for conforming product?
b) The manufacturer has identified a secondary market for the nonconforming products, that they can sell at $75/unit. Conforming product they wish to sell at 30% above costs. What is the expected profit per unit sold if the company has the same first-pass yield as in part a)?
c) If the company improves its first-pass yield to 98%, what is the expected profit per unit sold, assuming other conditions are as stated in part b)?
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