=+16-34 K Theory of constraints, throughput contribution, relevant costs OBJECTIVES 3, 5 Sphere Ltd manufactures electronic testing
Question:
=+16-34 K Theory of constraints, throughput contribution, relevant costs OBJECTIVES 3, 5 Sphere Ltd manufactures electronic testing equipment. Sphere Ltd also installs the equipment at customers’ sites and ensures that it functions smoothly. Additional information on the manufacturing and installation departments is as follows (capacities are expressed in terms of the number of units of electronic testing equipment):
Equipment manufactured Equipment installed Annual capacity 400 units per year 250 units per year Equipment manufactured and installed 250 units per year 250 units per year Sphere Ltd manufactures only 250 units per year because the Installation Department has only enough capacity to install 250 units.
The equipment sells for $60000 per unit (installed) and has direct materials costs of $35000. All costs other than direct materials costs are fixed. The following requirements refer only to the preceding data. There is no connection between the requirements.
Required 1 Sphere Ltd’s engineers have found a way to reduce equipment manufacturing time. The new method would cost an additional
$60 per unit and would allow Sphere Ltd to manufacture 20 additional units a year. Should Sphere Ltd implement the new method? Show your calculations.
Step by Step Answer:
Cost Accounting A Managerial Emphasis
ISBN: 9781442563377
2nd Edition
Authors: Monte Wynder, Madhav V. Rajan, Srikant M. Datar, Charles T. Horngren, William Maguire, Rebecca Tan