The Patience Corporation operates six days a week (Monday – Saturday) on a two-eight hour shifts. The plant which can complete ten (10) units per hour is closed twelve working days each year for holidays, machines are repaired, oiled and cleaned for about 616 hours during the period. Normal sales demand for its products averages 40,000 units a year over a five-year period. The expected sales volume for the year is 35,000 units. The fixed costs amount to P210,000 per year. REQUIRED: A. Compute the fixed costs per hour under each of the four capacities B. Compute the idle capacity costs under each of the four capacities if the plant operates at 3,400 hours.

The Patience Corporation operates six days a week (Monday – Saturday) on a two-eight hour shifts. The plant which can complete ten (10) units per hour is closed twelve working days each year for holidays, machines are repaired, oiled and cleaned for about 616 hours during the period. Normal sales demand for its products averages 40,000 units a year over a five-year period. The expected sales volume for the year is 35,000 units. The fixed costs amount to P210,000 per year. REQUIRED: A. Compute the fixed costs per hour under each of the four capacities B. Compute the idle capacity costs under each of the four capacities if the plant operates at 3,400 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

Chapter17: Activity Resource Usage Model And Tactical Decision Making

Section: Chapter Questions

Problem 6E: Elliott, Inc., has four salaried clerks to process purchase orders. Each clerk is paid a salary of...

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The Patience Corporation operates six days a week (Monday – Saturday) on a two-eight hourshifts. The plant which can complete ten (10) units per hour is closed twelve working days eachyear for holidays, machines are repaired, oiled and cleaned for about 616 hours during the period.Normal sales demand for its products averages 40,000 units a year over a five-year period. Theexpected sales volume for the year is 35,000 units. The fixed costs amount to P210,000 per year. REQUIRED:1. Determine the base capacity (in labor hours) for each of the following: (a) maximumcapacity; (b) practical capacity; (c) normal capacity; (d) expected actual capacity
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