Calculate the amount and cost of (a) unused manufacturing capacity and (b) unused selling and customer-service capacity at the beginning of 2020 based on actual production and actual number of customers served in 2020. First, calculate the amount and cost of (a) unused manufacturing capacity. = = Xeon can reduce selling and customer-service capacity by another This is the maximum amount of costs Xeon can save in 2020. Cost of unused capacity Now calculate the amount and cost of (b) unused selling and customer-service capacity. The amount of unused selling and customer-service capacity is customer-service capacity is customers and the cost of unused selling and Requirement 2. Suppose Xeon can add or reduce its selling and customer-service capacity in increments of 10 customers. What is the maximum amount of costs that Xeon could save in 2020 by downsizing selling and customer-service capacity? customers. Xeon will save another Data table 1. Units of HOV-X produced and sold 2. Selling price 3. Direct materials used (kits) 69 4. Direct material cost per kit 5.Manufacturing capacity in kits processed 6. Total conversion costs 7. Conversion cost per unit of capacity (row 6 + row 5) 8. Selling and customer-service capacity 9. Total selling and customer-service costs $ 10. Selling and customer-service capacity per customer (row 9 + row 8) $ * A kit is composed of all the major components needed to produce a hoverboard. $ 2019 5,000 96 $ 8,000 28 $ 19,000 342,000 $ 18 $ 2020 12,000 78 12,000 28 17,000 306,000 18 95 customers 95 customers 13,300 12,350 $ 130 $ 140 More info i Conversion costs in each year depend on production capacity defined in terms of kits that can be processed, not the actual kits started. Selling and customer-service costs depend on the number of customers that Xeon can support, not the actual number of customers it serves. Xeon has 75 customers in 2019 and 80 customers in 2020. Requirement 3. Xeon, in fact, does not eliminate any of its unused selling and customer-service capacity. Why might Xeon not downsize? Select two statements that would explain why Xeon might not downsize. Xeon may choose not to downsize because it wants to appear as though it has the capacity to produce many more units for potential customers. Xeon may choose not to downsize because it projects sales increases that would lead to a greater demand for and utilization of selling and customer-service capacity. It is difficult to reduce and then immediately increase capacity. Not reducing significant capacity by laying off employees boosts employee morale and keeps employees more motivated and productive. Xeon may choose not to downsize because competitors will view it as a sign of weakness if they downsize.