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Exhibit One ALPHA Cost and Product Information Direct materials Direct labour Machine costs Inspection costs Rework costs Purchasing 8!. Materials Handling (variable) Purchasing ii Materials

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Exhibit One ALPHA Cost and Product Information Direct materials Direct labour Machine costs Inspection costs Rework costs Purchasing 8!. Materials Handling (variable) Purchasing ii Materials Handling [xed] Fixed manufacturing costs Design 8: engineering costs (fixed) Exhibit Two $26.00 per unit $4.00 per unit $16.00 per unit $29.00 per testing hour $24.00 per unit reworked $0.65 per unit $14,000 per month $160,000 per month $20,000 per month Information on the ALPHA and the lie-Designed ALPHA Current Situation Considered a variable cost Considered a variable cost Considered a variable cost Direct material Direct labour Machine costs Inspection costs All units are inspected Inspection takes 0.10 hours per unit 6% of all units sold are re- worked Re-work costs Purchasing 81 Materials Handling Considered a variable cost (variable) Purchasing 8: Materials Handling (fixed) Fixed manufacturing costs Design costs Considered a fixed cost Considered a fixed cost Considered a fixed cost Redesigned ALPHA Costs are expected to be 5% lower Labour rates will be 4% higher Design change wlil reduce machine time bv 25% Inspection tlme wlil be reduced by 5%. All units will continue to be inspected. lfa second inspection point is added, it Is possible to reduce the number of units re- worked bv 85%. The cost per unit of the second inspection point Is 4096 of the cost of the first Inspection. Efficiencies in materials handling will reduce the unit cost bv 20% No change is anticipated No change is anticipated Cost increase of $5,000 per month to implement the changes suggested

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