Quantorus Data Storage Company (QDS) wants to compute the life cycle costs of equipment used in its

(LO 4) manufacturing process. QDS will use these life cycle costs to cost its data storage products. Although no rules govern life cycle costing by private companies, QDS wants to account for as much of its operating eXcel and ownership costs as possible to be sure that it costs its products accurately. Analysts have obtained eee eee the following information for a piece of robotic assembly equipment.

mhhe.com/hilton4e PURCHESERC OST OF iccc orerancrattesc meaeen ttece pepnn $250,000 Resale Cost StreGlaceMen t scssissconcsgeusctynnosoarspi aeta e $ 40,000 UWSSRUTERYV CANS HarantrecesaancsCc hote eeeerretten eeatkesn ste e 3

@peratingmoursOenVeaian mmr aute ec eer te 4,000

(OVaOLOAT ANA COSC CETOMIAN Sarohseha Peceereccesecccdgea eiesee de: 12%

Anna limSuraniGeiCOS trea rete tare aber eaten eee $ 1-000 Annual DiOOeKiyplay. tceeereten etree ei peer cere man ceed $445 Energy consumption per hour, kilowatt-hours (kwh)... 50 Energy COStiDer KWink. © ..ueaaeivena aearteeninaie: eee ae SynOt2s Annual scheduled maintenance COSt............:ceeeeee $ 10,440 AnnitiallWeOalr COS cca cui ee cece ee $ 24,110 Hourly operator cost (wage + benefits) .........0..0c8. $35 Required

a. Compute the life cycle ownership, operating, and total costs per hour for the robotic assembly equipment.

b. Prepare the cost of a batch of product that has the following characteristics:

MIS OMOLOGUCIIOC MOALC immt taartee veer Cantar ena eee 400 DireclabomhOurSie sextet et ate ae ene 200 Direct labor hourly rate (wage + benefits) ............0.00. $ 28.40 Assemblyeguionment nOUnS a eers-etchence scasvuaee. edueerec eee 80 Dinee timate tialena waa pees eusace cise ene mame eee $45,500.

Overhead rate per direct labor NOUT............cccceeeeeees $ 19.80 Overhead rate per equipment NOUT............cc cee $ (215 llancetinatevoreilimon:saleSt v1 aa..e teneree e 20%

c. The vice president of manufacturing at QDS expects that the market price for the product in requirement

(b) will be very competitive, about $150 per unit, and the low-cost producer will have opportunities to gain market share. The vice president suggests eliminating the opportunity cost of equipment and the overhead rates, which represent allocations of committed costs. Recompute the cost per unit and comment on the wisdom of these cuts.