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Modern Engineering Company manufactures motor engine parts at the rate of 2 units per hour. The factory normally operates 6 days a week on
Modern Engineering Company manufactures motor engine parts at the rate of 2 units per hour. The factory normally operates 6 days a week on a single eight-hour shift. During the year, it is closed on 16 working days for holidays. Equipment is idle for 160 hours during the year for cleaning, oiling, etc. Normal sales demand is expected to average 3000 units over the coming 5 year period. The actual sales volume for the current year turned out to be 2800 units which was the same as expected for the current year. You are required to compute the idle capacity assuming that overhead rates are computed on the basis of maximum capacity, practical capacity, normal capacity, and expected actual capacity respectively.
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Answer To compute the idle capacity under different capacity measures lets define each capacity measure first 1 Maximum capacity The maximum output th...Get Instant Access to Expert-Tailored Solutions
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