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E19-22 (similar to) Fast Print manufactures and sells 10,000 high-technology printing presses each year. The variable and fixed costs of rework and repair are as
E19-22 (similar to) Fast Print manufactures and sells 10,000 high-technology printing presses each year. The variable and fixed costs of rework and repair are as follows: B3 (Click the icon to view the cost data.) Fast Print's current presses have a quality problem that causes variations in the shade of some colors. Its engineers suggest changing a key component in each press. (Click the icon to view the data on the new component.) Read the requirements. Requirement 1. Should Fast Print change to the new component? Show your calculations. Begin by selecting the formula and calculating the relevant cost unt. x Relevant costs 1 Data Table Variable Cost Fixed Cost Total Cost $ 84 $ 150 $ 234 Rework cost per hour Repair costs Customer support cost per hour Transportation cost per load Warranty repair cost per hour 42 65 107 310 100 410 91 160 251 More Info The new component will cost $40 more than the old one. In the next year, however, Fast Print expects that with the new component it will (1) save 18,250 hours of rework, (2) save 750 hours of customer support, (3) move 300 fewer loads, (4) save 6,000 hours of warranty repairs, and (5) sell an additional 180 printing presses, for a total contribution margin of $720,000. Fast Print believes that even as it improves quality, it will not be able to save any of the fixed costs of rework or repair. Fast Print uses a 1-year time horizon for this decision because it plans to introduce a new press at the end of the year. Requirements 1. Should Fast Print change to the new component? Show your calculations. 2. Suppose the estimate of 180 additional printing presses sold is uncertain. What is the minimum number of additional printing presses that Fast Print needs to sell to justify adopting the new component? 3. What other factors should managers at Fast Print consider when making their decision about changing to a new component
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