Acme Metal Jobshop is in the process of purchasing a multipurpose drill press. Two models, A and B, are available with hourly operating costs of $20 and $35, respectively. Model A is slower than model B.Queuing analysis of similar machines shows that when A is used, the average number of jobs in the queue is 4, which is 30% higher than the queue size in B. A delayed job represents lost income, which is estimated by Acme at $10 per waiting job per hour. Which model should Acme purchase?

Acme Metal Jobshop is in the process of purchasing a multipurpose drill press. Two models, A and B, are available with hourly operating costs of $20 and $35, respectively. Model A is slower than model B.Queuing analysis of similar machines shows that when A is used, the average number of jobs in the queue is 4, which is 30% higher than the queue size in B. A delayed job represents lost income, which is estimated by Acme at $10 per waiting job per hour. Which model should Acme purchase?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Futura Company purchases the 68.000 starters that it installs in its standard line of farm tractors from a supplier for the price of $11.00 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $11.60 as shown below: Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit $5.00 2.80 1.70 1.00 0.20 0.40 $11.60 Total $ 115,600 $ 68,000 $ 27,200 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $115,600) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $84,000 per period.…
Polar Bear Computer Co. outsources the production of motherboards for its computers. It is currently deciding which of two suppliers to use: Alpha or Beta. Due to differences in the product failure rates in the two companies, 10% of motherboards purchased from Alpha will be inspected and 30% of motherboards purchased from Beta will be inspected. The following data refer to costs associated with Alpha and Beta: Number of orders per year 90. 90 Annual motherboards demanded 19,000 19,000 Price per motherboard $96 $90 Ordering cost per order $10 $11 Inspection cost per unit $5 $5 Average inventory level 200 units 200 units Expected number of stockouts 200 600 Stockout cost (cost of rush order) per stockout $3 $7 Units returned by customers for replacing motherboards 90 900 Cost of replacing each motherboard $23 $23 Required annual return on investment 10% 10% Other carrying cost per unit per year $2.30 $2.30 Requirement 1. What is the relevant cost of purchasing from…
Pine Street Inc. makes unfinished bookcases that it sells for $57. Production costs are $38 variable and $10 fixed. Because it has unused capacity. Pine Street is considering finishing the bookcases and selling them for $72. Variable finishing costs are expected to be $8 per unit with no increase in fixed costs. Prepare an analysis on a per unit basis showing whether Pine Street should sell unfinished or finished bookcases. (Enter negative amounts using either a negative sign preceding the number eg. -45 or parentheses eg. (45)) Sales price per unit Cost per unit Variable Fixed Total Net income per unit $ The bookcases Sell Process Further Net Income Increase (Decrease)
Novak Inc. makes unfinished bookcases that it sells for $60. Production costs are $38 variable and $10 fixed. Because it has unused capacity, Novak is considering finishing the bookcases and selling them for $72. Variable finishing costs are expected to be $9 per unit with no increase in fixed costs. Prepare an analysis on a per-unit basis that shows whether Novak should sell unfinished or finished bookcases. (If an amount reduces the net income then enter with a negative sign preceding the number, e.g. -15,000 or parenthesis, e.g. (15,000).) Net Income Sell Process Further Increase (Decrease) $ $ $ Sales per unit Variable cost per unit Fixed cost per unit Total per unit cost $ Net income per unit The bookcases processed further. $ $
Munabhai
Spaine Manufacturing produces surfboards. The company uses a normal-costing system and allocates manufacturing overhead on the basis of direct manufacturing labor-hours. Most of the company's production and sales occur in the first and second quarters of the year. The company is in danger of losing one of its larger customers, Sofo Wholesale, due to large fluctuations in price. The owner of Spaine has requested an analysis of the manufacturing cost per unit in the second and third quarters. You have been provided the following budgeted information for the coming year: (Click the icon to view the budgeted information.) (Click the icon to view additional information.) Read the requirements. Requirement 1 and 2. Calculate the total manufacturing cost per unit for the second and third quarter assuming the company allocates manufacturing overhead costs based on the budgeted manufacturing overhead rate determined for each quarter and an annual budgeted manufacturing overhead rate. First…
Artisan Metalworks has a bottleneck in their production that occurs within the engraving department. Jamal Moore, the COO, is considering hiring an extra worker, whose salary will be $55,000 per year, to solve the problem. With this extra worker, the company could produce and sell 2,900 more units per year. Currently, the selling price per unit is $26.00 and the cost per unit is $7.60. Direct materials $3.40 Direct labor 1.10 Variable overhead 0.40 Fixed overhead (primarily depreciation of equipment) 2.70 Total $7.60 Using the information provided, calculate the annual financial impact of hiring the extra worker. What is the profit?
Hot Ltd has 5,000 units in inventory that cost $1.50 per unit to produce. Due to changing technology, the sales department is having difficulty selling the product. It will cost $2,000 to scrap the units. The company should consider any price over:
Cullumber Street Inc. makes unfinished bookcases that it sells for $59. Production costs are $38 variable and $10 fixed. Because it has unused capacity, Cullumber Street is considering finishing the bookcases and selling them for $71. Variable finishing costs are expected to be $6 per unit with no increase in fixed costs. Prepare an analysis on a per unit basis showing whether Cullumber Street should sell unfinished or finished bookcases. (Enter negative amounts using either a negative sign preceding the number eg.-45 or parentheses eg. (45).) Sales price per unit $ Cost per unit Variable Fixed Total Sell Process Further $ $ Net Income Increase (Decrease) Net income per unit SUPPORT $ $ $
The financial manager of IDO, a company that manufactures and installs lifts (elevators), has to prepare a price for an order for a new lift for company A. Because A is a long-standing customer, IDO is prepared to provide this at a price that covers its relevant costs, with no mark-up-in order to secure a large future order. The lifts are manufactured to order in IDO’s factory. 180 hours of labour is needed at a cost of R14/hour. IDO currently has 120 hours of unused labour that could be utilized. The raw materials needed to make the lift will cost R61 000. The installation of the lift is done by sub-contractors. A site review has already been conducted at a cost of R3 000 and the sub-contractor has offered to undertake the job at a further cost of R81 000. IDO has just received an order from company B for a lift that needs to be installed urgently. The total profit of this job would be R48 000. IDO does not have the machine capacity to deliver lifts for both A and B. Which price…
Please help me
In the last 6 months, demand for one of Appleby Company's products has dropped off considerably, due mainly to it becoming obsolescent as a result of technological change. Knowing that the equipment used in the manufacture of this product may not be easy to sell, Appleby spent $50,000 on consultants to determine whether it could use the equipment to produce a new product under license by another company. The consultant has determined that this product would have variable production costs of $65 per unit and should sell at a price of $90/unit. The licensing royalty is 5% of gross product revenue. Estimated annual demand is 20,000 units per year. Additional annual operating costs related to this product are $30,000/year (excluding depreciation). Depreciation on the equipment is $15,000. Annual depreciation expense is a: O a. Sunk cost O b. Relevant cost O c. Both sunk and Irrelevant cost Od. Irrelevant cost