I need help with this CAM-I capacity utilization question!

2. Rogers & Shum Machine Shop, Inc. Rogers & Shum Machine Shop (R&S) makes a complex part for the generator industry. Demand for this part is very high - sales are limited only by R&S's ability to market and sell the part. R&S operates a computer controlled lathe machine which can produce, on average, one part every three minutes. R&S runs three eight hour shifts per day, 5 days per week (assume the 365 th day falls on a weekend). All employees take 10 days paid vacation at the same time in August and are given 6 days off for paid holidays during the year. For the 2015 fiscal year just ended, R&S had the following financial results compared to 2014 for this part: Emma, the CEO, was concerned as profits were down over 50% for this part despite a 6+% increase in units sold and noted a significant part of the problem was increased cost of sales which was made up of the following costs: Matt, the manufacturing accountant, provided a more detailed analysis of actual cost per good unit by process step for 2015 as follows: In 2015, direct labor staffing for the three shifts for this part was 29, up from 28 in 2014; direct labor was paid at a rate of $13.20 per hour including fringe benefits in 2015 for 2,000 hours per year (up from $12.00 per hour in 2014 due to union contract); fixed manufacturing overhead was charged to processes based on units produced at $4.00 per unit. Direct labor workers also did a variety of tasks not directly related to machining such as manual rework and quality circles; this cost is reflected in the Fixed Manufacturing Overhead. In addition, you learn the following about 2015: Direct labor workers spent about 3% of their total time with supervisors in quality circles to develop ideas for improving quality; supervisors spent about 10% of their time in the quality circles. Supervisors spent another 15% of their time doing random quality checks in each step of the production process. Supervisor cost of $130,000 is included in Fixed Manufacturing Overhead. Another 5% of total direct labor time was spent to re-work 6% of units produced in 2015. Rework is a manual process which does not require any machine capacity. In 2014, 3,000 units required re-work. During 2015, 5% of units started were scrapped after the inspection step due to irreparable quality problems. There was no salvage value for the scrapped units. In 2014, 2,000 units had been scrapped. In 2015, preventative maintenance on the machine was performed by 8 direct labor workers on one 8 hour night shift every week; additional downtime for the machine occurred periodically when raw material supplies were not available due to disruptions in just-in-time inventory management processes - approximately 300 hours per year. Each order required setup of approximately 75 minutes; average batch size per order was 200 units in 2015. Analysis of 2015 R&D/Engineering expense indicated that approximately 5% of that expense was related to improving product quality through better product and manufacturing process design. Another 8% was related to troubleshooting serious customer problems that could not be fixed by the customer support department (which is part of SG&A expense). Analysis of 2015 SG&A expense indicated that customer support department cost was approximately 20% of total SG&A expense; of this amount, about 40% was for handling customer complaints while the remainder was for order administration, credit checking, order status, etc. Assignment: A. Prepare a capacity analysis for R&S management for 2015 to classify the amount of machine capacity (measured in units) in each of the relevant CAM-I capacity utilization categories. What recommendations would you make to R&S management