Shrewsbury Technologies, which manufactures high-technology instruments for spacecraft, is considering the sale of a navigational unit to a private company that wishes to launch its own communications satellite. The company plans to purchase 8 units, although it would also consider buying 16 units. Shrewsbury has started a chart relating labor time required to units produced: Unit Produced (x) 1 2 4 8 16 Time Required to Produce the Xth Unit 5,000 hours 4,500 hours 4,050 hours ? ? Required: a. Compute the labor time required to produce 8 and 16 units. b. Assume that labor time costs $140 per hour. Compare the cost of producing the 1st unit to the cost of producing the 16th unit. What is the percentage of the cost of the 16th unit to the cost of the 1st unit? Complete this question by entering your answers in the tabs below. Required A Required B Compute the labor time required to produce 8 and 16 units. Note: Round your answers to 1 decimal place. Time required to produce 8th unit Time required to produce 16th unit hours hours

Shrewsbury Technologies, which manufactures high-technology instruments for spacecraft, is considering the sale of a navigational unit to a private company that wishes to launch its own communications satellite. The company plans to purchase 8 units, although it would also consider buying 16 units. Shrewsbury has started a chart relating labor time required to units produced: Unit Produced (x) 1 2 4 8 16 Time Required to Produce the Xth Unit 5,000 hours 4,500 hours 4,050 hours ? ? Required: a. Compute the labor time required to produce 8 and 16 units. b. Assume that labor time costs $140 per hour. Compare the cost of producing the 1st unit to the cost of producing the 16th unit. What is the percentage of the cost of the 16th unit to the cost of the 1st unit? Complete this question by entering your answers in the tabs below. Required A Required B Compute the labor time required to produce 8 and 16 units. Note: Round your answers to 1 decimal place. Time required to produce 8th unit Time required to produce 16th unit hours hours

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 31P: Jonfran Company manufactures three different models of paper shredders including the waste...

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Required:

Compute the labor time required to produce 8 and 16 units.
Assume that labor time costs $140 per hour. Compare the cost of producing the 1st unit to the cost of producing the 16th unit. What is the percentage of the cost of the 16th unit to the cost of the 1st unit?

Shrewsbury Technologies, which manufactures high-technology instruments for spacecraft, is considering the sale of a navigational
unit to a private company that wishes to launch its own communications satellite. The company plans to purchase 8 units, although it
would also consider buying 16 units. Shrewsbury has started a chart relating labor time required to units produced:
Unit Produced (x)
1
2
4
8
16
Time Required to Produce
the Xth Unit
5,000 hours
4,500 hours
4,050 hours
?
?
Required:
a. Compute the labor time required to produce 8 and 16 units.
b. Assume that labor time costs $140 per hour. Compare the cost of producing the 1st unit to the cost of producing the 16th unit. What
is the percentage of the cost of the 16th unit to the cost of the 1st unit?
Complete this question by entering your answers in the tabs below.
Required A Required B
Compute the labor time required to produce 8 and 16 units.
Note: Round your answers to 1 decimal place.
Time required to produce 8th unit
Time required to produce 16th unit
hours
hours

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Shrewsbury Technologies, which manufactures high-technology instruments for spacecraft, is considering the sale of a navigational unit to a private company that wishes to launch its own communications satellite. The company plans to purchase 8 units, although it would also consider buying 16 units. Shrewsbury has started a chart relating labor time required to units produced: Unit Produced (X) Time Required to Produce the Xth Unit 1 18,000 hours 2 14,400 hours 4 11,520 hours 8 ? 16 ? Questions: Compute the labor time required to produce 8 and 16 units. Assume that labor time costs $153 per hour. Compare the cost of producing the 1st unit to the cost of producing the 16th unit. What is the percentage of the cost of the 16th unit to the cost of the 1st unit?
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Jonfran Company manufactures three different models of paper shredders including the waste container, which serves as the base. While the shredder heads are different for all three models, the waste container is the same. The number of waste containers that Jonfran will need during the following years is estimated as follows: The equipment used to manufacture the waste container must be replaced because it is broken and cannot be repaired. The new equipment would have a purchase price of 945,000 with terms of 2/10, n/30; the companys policy is to take all purchase discounts. The freight on the equipment would be 11,000, and installation costs would total 22,900. The equipment would be purchased in December 20x4 and placed into service on January 1, 20x5. It would have a five-year economic life and would be treated as three-year property under MACRS. This equipment is expected to have a salvage value of 12,000 at the end of its economic life in 20x9. The new equipment would be more efficient than the old equipment, resulting in a 25 percent reduction in both direct materials and variable overhead. The savings in direct materials would result in an additional one-time decrease in working capital requirements of 2,500, resulting from a reduction in direct material inventories. This working capital reduction would be recognized at the time of equipment acquisition. The old equipment is fully depreciated and is not included in the fixed overhead. The old equipment from the plant can be sold for a salvage amount of 1,500. Rather than replace the equipment, one of Jonfrans production managers has suggested that the waste containers be purchased. One supplier has quoted a price of 27 per container. This price is 8 less than Jonfrans current manufacturing cost, which is as follows: Jonfran uses a plantwide fixed overhead rate in its operations. If the waste containers are purchased outside, the salary and benefits of one supervisor, included in fixed overhead at 45,000, would be eliminated. There would be no other changes in the other cash and noncash items included in fixed overhead except depreciation on the new equipment. Jonfran is subject to a 40 percent tax rate. Management assumes that all cash flows occur at the end of the year and uses a 12 percent after-tax discount rate. Required: 1. Prepare a schedule of cash flows for the make alternative. Calculate the NPV of the make alternative. 2. Prepare a schedule of cash flows for the buy alternative. Calculate the NPV of the buy alternative. 3. Which should Jonfran domake or buy the containers? What qualitative factors should be considered? (CMA adapted)
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