Suppose a quality manager is to make a decision between two manufacturing processes for the manufacture of a certain component. Process A costs 150 dollars per unit to manufacture a component. Process B costs 160 dollars per unit to manufacture a component. Components have an exponential time to failure distribution with mean time to failure of 300 hours for process A, while components from process B have a mean time to failure of 350 hours. Because of a warranty clause, if a component lasts less than 400 hours, the manufacturer must pay a penalty of 75 dollars. Based on the expected cost, would the quality manager select Process A? Explain why or why not? Show your work.

Suppose a quality manager is to make a decision between two manufacturing processes for the manufacture of a certain component. Process A costs 150 dollars per unit to manufacture a component. Process B costs 160 dollars per unit to manufacture a component. Components have an exponential time to failure distribution with mean time to failure of 300 hours for process A, while components from process B have a mean time to failure of 350 hours. Because of a warranty clause, if a component lasts less than 400 hours, the manufacturer must pay a penalty of 75 dollars. Based on the expected cost, would the quality manager select Process A? Explain why or why not? Show your work.

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

A manager is trying to decide whether to purchase a certain part or to have it produce internally. Internal production could use either of two processes. One would entail a variable cost of P17 per unit and an annual fixed cost of P200,000, the other would entail a variable cost of P14 per unit and an annual fixed cost of 240,000. Three vendors are willing to provide the part. Vendor A has a price of P20 per unit for any volume up to 30,000 units. Vendor B has a price of P22 per unit for demand of 1,000 units less, and P18 per unit for larger quantities. Vendor C offers a price of P21 per unit for the first 1,000 units, and P19 per unit for additional units. Required: If the manager anticipates an annual volume of 10,000 units, which alternative would be best from a cost standpoint?
Green Co. incurses cost of $15 per pound to produce Product X, which it sells for $26 per pound. The company can further process Product X to produce Product Y. Product Y would sell for $30 per pound and would require an additional cost of $10 per pound to be produced. The differential cost of producing Product Y is _____.
Magnificent Modems has excess production capacity and is considering the possibility of making and selling security tokens. The following estimates are based on a production and sales volume of 1,000 security tokens. Unit-level manufacturing costs are expected to be $20. Sales commissions will be established at $1 per unit. The current facility-level costs, including depreciation on manufacturing equipment ($60,000), rent on the manufacturing facility ($50,000), depreciation on the administrative equipment ($12,000), and other fixed administrative expenses ($71,950), will not be affected by the production of the security tokens. The chief accountant has decided to allocate the facility-level costs to the existing product (modems) and to the new product (security tokens) on the basis of the number of units of product made (i.e., 5,000 modems and 1,000 security tokens). Required a. Determine the per-unit cost of making and selling 1,000 security tokens. Note: Do not round intermediate…
Bunyon Lumber Company incurs a cost of $490 per hundred board feet in processing certain "rough cut" lumber, which it sells for $635 per hundred board feet. An alternative is to produce a "finished cut" at a total processing cost of $565 per hundred board feet, which can be sold for $480 per hundred board feet. What is the amount of (a) the differential revenue, (b) differential cost, and (c) differential income for processing rough-cut lumber into finished cut?
ABC company manufactures a particular computer component. Currently, the cost per unit is as follows: Direct Materials;P50, Direct Labor,P500; Variable Overhead,P250; Fixed Overhead,P400XYZ company has obtained with an offer to sell 10,000 units of the component for P1,100 per unit. If ABC accepts the proposal, P2,500,000 of the fixed overhead will be eliminated. Should ABC make or buy the component? Select the correct response: Make due to savings of P3,000,000 Buy due to savings of P1,000,000 Buy due to savings of P2,500,000 Make due to savings of P500,000
Zycon has produced 10,000 units of partially finished Product A. These units cost $15,000 to produce, and they can be sold to another manufacturer for $20,000. Instead, Zycon can process the units further and produce finished Products X, Y, and Z. Processing further will cost an additional $22,000 and will yield total revenues of $35,000. Place an X in the appropriate column to identify whether the item is relevant or irrelevant to the sell or process further decision.
Lakeside Incorporated produces a product that currently sells for $46.80 per unit. Current production costs per unit include direct materials, $13; direct labor, $15; varlable overhead, $6.50; and fixed overhead, $6.50. Product engineering has determined that a certain part of the product conversion process could be outsourced. Raw material costs would not be affected, but direct labor and variable overhead costs would be reduced by 30%. No other opportunity is currently feasible for unused production capacity. Required: a. What would be the net cost advantage or disadvantage if Lakeview decided to outsource part of the conversion process at a cost of $5.20 per unit? Note: Do not round your Intermediate calculations. Round your final answer to 2 decimal places. b. Should Lakeside outsource part of the conversion process at a cost of $5.20 per unit? a. b. Should Lakeside outsource conversion process at this cost?
Crane Industries incurs unit costs of $6 ($4 variable and $2 fixed) in making an assembly part for its finished product. A supplier offers to make 13,500 of the assembly part at $5 per unit. If the offer is accepted, Crane will save all variable costs but no fixed costs. Prepare an analysis showing the total cost saving, if any, that Crane will realize by buying the part. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Variable manufacturing costs Fixed manufacturing costs Purchase price Total annual cost The decision should be to $ Make the part $ Buy $ $ Net Income Increase (Decrease)
oncorde Ltd has been asked to quote a price for an order of 8 units of Product Delta. Making this product will require skilled labour, which is currently in hort supply and is paid £15 an hour. If the order is accepted, all necessary labour will have to be transferred from existing work. As a result, other orders will be lost. It is estimated that for each hour transferred to this contract £45 will be lost (calculated as lost sales revenue £75, less materials £15 and labour 15). The production manager believes that, owing to a learning process, the time taken to make each unit will reduce, from 20 hours to make the first one, by one hour a unit made. (That is 20 hours to make the first one, 19 hours to make the second, 18 hours to make the third one and so on.) What is the total relevant cost of skilled labour for the purposes of the order? The relevant cost for skilled labour will be will be £. ... Time Remaining: 00:43:50 Next
Accounting Zain must decide how best to use a monthly factory capacity of 1,500 units. Demand from regular customers is risky and could be either 500, 600 or 700 units per month. Regular customers generate contribution of $6 per unit. Zain has the opportunity to enter a special contract which will generate contribution of only $4 per unit. For the special contract, she must enter a binding agreement now at a level of 1000, 800 оr 600 units. Instructions: Display all possible contributions in the table below. Show your calculation. Special contract Demand units 1000 800 600 500 600 700
A customer has requested that Stanford Corporation fill a special order for 9,000 units of product S47 for $20.50 a unit. While the product would be modified slightly for the special order, product S47's normal unit product cost is $14.40: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit product cost O $(9,900) Assume that direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like modifications made to product S47 that would increase the variable costs by $5.00 per unit and that would require an investment of $36,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. The annual financial advantage (disadvantage) for the company as a result of accepting this special order should be: O $4,500 S O $54,900 O…
Use the following information for the Quick Study below. (Algo) [The following information applies to the questions displayed below.] Helix Company is approached by a new customer to provide 1,800 units of its product at a special price of $9 per unit. The normal selling price of the product is $11 per unit. Helix is operating at 80% of its capacity of 11,500 units. No incremental fixed overhead will be incurred because of this order. Also, there will be no incremental fixed general and administrative costs because of this order. QS 23-2 (Algo) Special offer LO P7 a. Special selling price of $9.00 per unit b. Direct materials of $2.00 per unit c. Direct labor of $3.00 per unit d. Variable overhead of $2.50 per unit e. Fixed overhead of $.75 per unit f. Fixed general and administrative costs of $.60 per unit Based on income, should Helix accept this new customer order at the special price? Sales Variable costs SPECIAL OFFER ANALYSIS Direct materials Direct labor Variable overhead…