A piece of production equipment is purchased for an initial cost of $1,200,000. It has a life of 10 years. The factory will have two shifts, the day shift is 12 hours and the night shift is 8 hours. It will cover 6 days a week for 52 weeks of the year. The overhead rate for the equipment is 20%. In addition, the equipment is used to produced products by batch. The starting material cost is $5.20 for each product. The batch quantity is 85. The actual process time in the operation is 4.1 minutes. The time to load is 1 minute and the time to unload is 0.2 minutes. The tool cost is $8.50 and it can be used for 30 products before it needs to be changed. This change over time takes 8 minutes. Before production can start the equipment must be set up, which takes 210 minutes. The hourly wage rate for the operator is $25/hour. The labor overhead is 50%. Part A: Determine the equipment cost rate. Part B: Determine the cycle time for each piece/product. Part C: Determine the average production rate when setup time is included. Part D: Determine the cost per piece/product.

A piece of production equipment is purchased for an initial cost of $1,200,000. It has a life of 10 years. The factory will have two shifts, the day shift is 12 hours and the night shift is 8 hours. It will cover 6 days a week for 52 weeks of the year. The overhead rate for the equipment is 20%. In addition, the equipment is used to produced products by batch. The starting material cost is $5.20 for each product. The batch quantity is 85. The actual process time in the operation is 4.1 minutes. The time to load is 1 minute and the time to unload is 0.2 minutes. The tool cost is $8.50 and it can be used for 30 products before it needs to be changed. This change over time takes 8 minutes. Before production can start the equipment must be set up, which takes 210 minutes. The hourly wage rate for the operator is $25/hour. The labor overhead is 50%. Part A: Determine the equipment cost rate. Part B: Determine the cycle time for each piece/product. Part C: Determine the average production rate when setup time is included. Part D: Determine the cost per piece/product.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter13: The Balanced Scorecard: Strategic-based Control

Section: Chapter Questions

Problem 24P: Lander Parts, Inc., produces various automobile parts. In one plant, Lander has a manufacturing cell...

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