OPERATIONS MANAGEMENT W/ CNCT+
OPERATIONS MANAGEMENT W/ CNCT+
12th Edition
ISBN: 9781259574931
Author: Stevenson
Publisher: MCG CUSTOM
bartleby

Concept explainers

Question
Book Icon
Chapter 7.S, Problem 9P

a)

Summary Introduction

To determine: The unit cost for 20 units.

Introduction: Learning curve is referred as the cost curve, experience curve, efficiency curve or productivity curve. The leaving curve gives information about the cost, efficiency, productivity and performance of an organization.

a)

Expert Solution
Check Mark

Answer to Problem 9P

The unit cost for 20 units is $80.31.

Explanation of Solution

Given information:

Laborcost=$8.50perhourSetupcost=$50.00Materialcost=$20.00perunitLearningcurve=90%

Overhead=50%oflabor,materialsandsetupcostT1=5hoursPurchasecost=$88.50perunit

Formula:

Tn=T1×Unitfactor

Calculation of unit cost for 20 units:

The time to compute the unit cost for 20 units is to compute the average cost for 20 units. It can be computed by finding labor cost, material cost, overhead cost and total cost. From the total cost, the average cost is computed.

Estimation of labor, material, overheads and total cost:

At 90% learning curve, the unit factor for 20 unit is 14.608 (using learning curve coefficient table)

T120=T1×14.608=5×14.608=73.04hours

The time for completing the 20 units is calculated by multiplying 5 with the unit factors 14.608 which yields 73.04 hours.

Laborcost=73.04hours×8.50perhour=$620.84

The labor cost is calculated by multiplying 73.045 hours with 8.50 which yields $620.84.

Materialcost=20units×$20perunit=$400.00

Material cost is calculated by multiplying 20 units with $20 per unit which yields $400.

Overheadcost=0.50×($620.84+$400.00+$50.0)=$535.42

The overhead cost calculated by taking 50% of labor, material and setup cost which accounts to $535.42

Totalcost=Setupcost+Laborcost+Materialcost+Overheadcost=$50+$620.84+$535.42+$400.00=$1,606.26

The total cost is calculated by summing up labor cost, material cost and overhead cost which is adding $50, $620.84, $535.42 and $400.00 which yields $1,606.26.

Averagecostperunit=$1,606.2620=$80.31

The average cost per unit is calculated by dividing $1,606.26 with 20 which yields $80.31.

Hence, the unit cost for 20 units is $80.31.

b)

Summary Introduction

To determine: The minimum production quantity necessary to make the production cost less than the purchase cost.

Introduction: Learning curve is referred as the cost curve, experience curve, efficiency curve or productivity curve. The leaving curve gives information about the cost, efficiency, productivity and performance of an organization.

b)

Expert Solution
Check Mark

Answer to Problem 9P

The minimum production quantity necessary to make the production cost less than the purchase cost is $88.46.

Explanation of Solution

Given information:

Laborcost=$8.50perhourSetupcost=$50.00Materialcost=$20.00perunitLearningcurve=90%

Overhead=50%oflabor,materialsandsetupcostT1=5hoursPurchasecost=$88.50perunit

Formula:

Tn=T1×Unitfactor

Calculation of minimum production quantity necessary to make the production cost less than the purchase cost:

The production cost per unit is $80.31 per unit for 20 units and it is less than the purchase cost which is $88.50 per unit. By trial and error approach the numbers which accounts to less than the purchase cost is computed which are 10 units.

Estimation of labor, material, overheads and total cost:

At 90% learning curve, the unit factor for 10 unit is 7.994 (using learning curve coefficient table)

T110=T1×7.994=5×7.994=39.97hours

The time for completing 10 units is calculated by multiplying 5 with the unit factors 7.994 which yields 39.97 hours.

Laborcost=39.97hours×8.50perhour=$339.75

The labor cost is calculated by multiplying 39.97 hours with 8.50 which yields $339.75.

Materialcost=10units×$20perunit=$200.00

Material cost is calculated by multiplying 10 units with $20 per unit which yields $200.

Overheadcost=0.50×($339.75+$200.00+$50.0)=$294.88

The overhead cost calculated by taking 50% of labor, material and setup cost which accounts to $294.88

Totalcost=Setupcost+Laborcost+Materialcost+Overheadcost=$50+$339.75+$294.88+$200.00=$884.63

The total cost is calculated by summing up labor cost, material cost and overhead cost which is adding $50, $339.75, $294.88 and $200 which yields $884.63.

Averagecostperunit=$884.6310=$88.46

The average cost per unit is calculated by dividing $884.63 with 10 which yields $88.46 which is less than $88.50.

Hence, the minimum production quantity necessary to make the production cost less than the purchase cost is $88.46.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
Problem 1 (20 Points) Davison Electronics manufactures three LED television monitors, identified as Model A, Model B, and Model C. Davison Electronics four manufacturing plants. Each model has its lowest possible production cost when produced at Plant 1. However, Plant 1 does not have the capacity to handle the total production of all three models. As a result, at least some of the production must be routed to the other manufacturing plants. The following table shows the minimum production requirements for next month, the plant capacities in units per month, and the production cost per unit at each plant: Model Production Cost per Unit Minimum Production Requirements Plant 1 Plant 2 Plant 3 Plant 4 A $25 $28 $37 $34 48,000 B $26 $35 $36 $41 75,000 C $20 $31 $26 $23 60,000 Production Capacity 65,000 50,000 32,000 43,000   Davison’s objective is to determine the cost-minimizing production plan. Without…
SECTION B: TOPIC STRUCTURE CAPSTONE PROJECT TOPIC SUBMISSION TEMPLATE SECTION A: STUDENT DETAILS Student number Title (Mr/Miss/Ms/Mrs) Surname First name/s Title of research Date and year of registration Work Home Contact details Cell Region Date submitted Email 1.1 Title Insert title of the research. Choose a title that captures the essence of your proposed project. 1.2 Background to the Problem This section will be used to create the readers' interest. It can include a specific description of the topic that is to be investigated. A brief preview of the topic and the foundation of the problem should also be given. The researcher can achieve this through building up a detailed background of circumstances that lead to the problem being examined. Therefore, the background helps the reader understand the specific problem addressed by the researcher. This section should not include the background/history of the organisation. The background to the problem should not be more than ½ a page.…
Does Nike Corporation's emphasis on lean operations help the Vietnamese workforce that still earns $150.00 minimum wage a month since 2014?

Chapter 7 Solutions

OPERATIONS MANAGEMENT W/ CNCT+

Knowledge Booster
Background pattern image
Operations Management
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
Understanding Management (MindTap Course List)
Management
ISBN:9781305502215
Author:Richard L. Daft, Dorothy Marcic
Publisher:Cengage Learning
Text book image
Practical Management Science
Operations Management
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:Cengage,
Text book image
Management, Loose-Leaf Version
Management
ISBN:9781305969308
Author:Richard L. Daft
Publisher:South-Western College Pub
Text book image
Principles of Management
Management
ISBN:9780998625768
Author:OpenStax
Publisher:OpenStax College