A manufacturing cell has the theoretical capability to produce 60,000 space heaters per quar¬

ter. The conversion cost per quarter is $600,000. There are 20,000 production hours available within the cell per quarter.

Required:

1. Compute the theoretical velocity (per hour) and the theoretical cycle time (minutes per unit produced).

2. Compute the ideal amount of conversion cost that will be assigned per heater.

3. Suppose the actual time required to produce a heater is 30 minutes. Compute the amount of conversion cost actually assigned to each heater. Discuss how this approach to as¬

signing conversion cost can improve delivery time.

4. Calculate MCE. How much nonvalue-added time is being used? How much is it cost¬

ing per heater?

5. Cycle time, velocity, MCE, conversion cost per unit (theoretical conversion rate X ac¬

tual conversion time), and nonvalue-added costs are all measures of performance for the cell process. Discuss the incentives provided by these measures.