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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
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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