The Cary Plant produces a part for agricultural equipment. The plant produces to demand rather than maintaining significant Inventories, so there can be significant fluctuation in monthly output. One of the significant cost Items is maintenance and repair (M&R) costs. M&R consists of both routine and unscheduled costs. The plant manager is trying to understand what effect production volume has on M&R costs and is getting conflicting Information from the machine operators (who believe that higher output is related to higher M&R costs) and the financial staff (who say that their analyses do not show this). Data on monthly output (In machine hours) and monthly M&R costs for the most recent two fiscal years follow: Month October November December January February March April May June July August September October November December Machine-Hours 223,560 235,980 397,440 310,500 385,020 558,900 273,240 360,180 285,660 298,080 322,920 186,300 211,140 322,920 372 600 M&R Cost $ 56,510 59,320 24,150 34,230 36,340 9,140 36,580 43,380 53,230 52,290 30,250 55,570 48,070 29,780 42 678
The Cary Plant produces a part for agricultural equipment. The plant produces to demand rather than maintaining significant Inventories, so there can be significant fluctuation in monthly output. One of the significant cost Items is maintenance and repair (M&R) costs. M&R consists of both routine and unscheduled costs. The plant manager is trying to understand what effect production volume has on M&R costs and is getting conflicting Information from the machine operators (who believe that higher output is related to higher M&R costs) and the financial staff (who say that their analyses do not show this). Data on monthly output (In machine hours) and monthly M&R costs for the most recent two fiscal years follow: Month October November December January February March April May June July August September October November December Machine-Hours 223,560 235,980 397,440 310,500 385,020 558,900 273,240 360,180 285,660 298,080 322,920 186,300 211,140 322,920 372 600 M&R Cost $ 56,510 59,320 24,150 34,230 36,340 9,140 36,580 43,380 53,230 52,290 30,250 55,570 48,070 29,780 42 678
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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