Stanmore Corporation makes a special-purpose machine, D4H, used in the textile industry. Stanmore has designed the D4H machine for 2017 to be distinct from its competitors. It has been generally regarded as a superior machine. Stanmore presents the following data for 2016 and 2017. 2016 200 1. Units of D4H produced and sold 2. Selling price 3. Direct materials (kilograms) 4. Direct material cost per kilogram 5. Manufacturing capacity in units of D4H 6. Total conversion costs 7. Conversion cost per unit of capacity (row 6 / row 5) 8. Selling and customer-service capacity 9. Total selling and customer-service costs 10. Selling and customer-service capacity per customer (row 9 / row 8) 40,000 $ 300,000 8.00 $ 250 $ 2,000,000 $ $ 8,000 $ 100 customers $ 1,000,000 $ $ 10,000 $ 2017 210 42,000 310,000 8.50 250 2,025,000 8,100 95 customers 940,500 9,900 Stanmore produces no defective machines, but it wants to reduce direct materials usage per D4H machine in 2017. Conversion costs in each year depend on production capacity defined in terms of D4H units that can be produced, not the actual units produced. Selling and customer-service costs depend on the number of customers that Stanmore can support, not the actual number of customers it serves. Stanmore has 75 customers in 2016 and 80 customers in 2017 Requirement 1. Calculate the amount and cost of (a) unused manufacturing capacity and (b) unused selling and customer-service capacity at the beginning of 2017 based on actual production and actual number of customers served in 2017 Amount of Cost of unused capacity unused capacity (a) Manufacturing (b) Selling and customer service Requirement 2. Suppose Stanmore can add or reduce its manufacturing capacity in increments of 30 units. What is the maximum amount of costs, if any, that Stanmore could save in 2017 by downsizing manufacturing capacity? Begin by selecting the formula you will use and then enter the amounts and calculate the maximum cost the company can save. (Complete all answer boxes. For amounts with a zero balance, enter a "0".) = Maximum costs saved by downsizing Requirement 3. Stanmore, in fact, does not eliminate any of its unused manufacturing capacity. Why might Stanmore not downsize? Select three statements that would explain why Stanmore might not downsize. I Stanmore may be focused on product differentiation, which is key to its strategy, rather than on cost reduction. Stanmore may choose not to downsize because it projects sales increases that would lead to a greater demand for and utilization of capacity. Stanmore may choose not to downsize because competitors will view it as a sign of weakness if they downsize. Stanmore may choose not to downsize because it wants to appear as though it has the capacity to produce many more units for potential customers Stanmore may choose not to downsize because downsizing requires a significant reduction in capacity. For example, Stanmore may have chosen to downsize some more manufacturing capacity if it could do so in increments of say, 10, rather than 30 units. I 7 Stand Stanmore Corporation makes a special-purpose machine, D4H, used in the textile industry. Stanmore has designed the D4H machine for 2017 to be distinct from its competitors. It has been generally regarded as a superior machine. Stanmore presents the following data for 2016 and 2017. 2016 200 1. Units of D4H produced and sold 2. Selling price 3. Direct materials (kilograms) 4. Direct material cost per kilogram 5. Manufacturing capacity in units of D4H 6. Total conversion costs 7. Conversion cost per unit of capacity (row 6 / row 5) 8. Selling and customer-service capacity 9. Total selling and customer-service costs 10. Selling and customer-service capacity per customer (row 9 / row 8) 40,000 $ 300,000 8.00 $ 250 $ 2,000,000 $ $ 8,000 $ 100 customers $ 1,000,000 $ $ 10,000 $ 2017 210 42,000 310,000 8.50 250 2,025,000 8,100 95 customers 940,500 9,900 Stanmore produces no defective machines, but it wants to reduce direct materials usage per D4H machine in 2017. Conversion costs in each year depend on production capacity defined in terms of D4H units that can be produced, not the actual units produced. Selling and customer-service costs depend on the number of customers that Stanmore can support, not the actual number of customers it serves. Stanmore has 75 customers in 2016 and 80 customers in 2017 Requirement 1. Calculate the amount and cost of (a) unused manufacturing capacity and (b) unused selling and customer-service capacity at the beginning of 2017 based on actual production and actual number of customers served in 2017 Amount of Cost of unused capacity unused capacity (a) Manufacturing (b) Selling and customer service Requirement 2. Suppose Stanmore can add or reduce its manufacturing capacity in increments of 30 units. What is the maximum amount of costs, if any, that Stanmore could save in 2017 by downsizing manufacturing capacity? Begin by selecting the formula you will use and then enter the amounts and calculate the maximum cost the company can save. (Complete all answer boxes. For amounts with a zero balance, enter a "0".) = Maximum costs saved by downsizing Requirement 3. Stanmore, in fact, does not eliminate any of its unused manufacturing capacity. Why might Stanmore not downsize? Select three statements that would explain why Stanmore might not downsize. I Stanmore may be focused on product differentiation, which is key to its strategy, rather than on cost reduction. Stanmore may choose not to downsize because it projects sales increases that would lead to a greater demand for and utilization of capacity. Stanmore may choose not to downsize because competitors will view it as a sign of weakness if they downsize. Stanmore may choose not to downsize because it wants to appear as though it has the capacity to produce many more units for potential customers Stanmore may choose not to downsize because downsizing requires a significant reduction in capacity. For example, Stanmore may have chosen to downsize some more manufacturing capacity if it could do so in increments of say, 10, rather than 30 units. I 7 Stand