Question
The management of Eco Farms (EF) prepares various products for the Agricultural market. The Sargassum Seaweed problem has resulted in lower fish being harvested from
The management of Eco Farms (EF) prepares various products for the Agricultural market. The Sargassum Seaweed problem has resulted in lower fish being harvested from the sea and a resulting increase in fish prices. EF engineers and designers recognize the opportunity and has created a prototype semi submerged tank with attachment which can be used for fish farming. The information for the Fish Farming Tank is shown below.
Direct material cost per unit $32,000
Direct labor time for the assembly of first unit in hours 120
Direct labor cost per hour $ 90
Learning effect for design hours per unit 90%
Variable manufacturing overhead 50% of direct labor cost
Fixed overhead cost per Tank $2,000
(A 90% learning curve implies that b = -0.1520)
The first unit is kept on display. A finished Tank carries a 15% mark up on variable cost. It is believed that the learning effect is valid only for the first 15 units. All units thereafter take the same time per unit as the 15th unit
Required
Determine the total cost to the BAMC for an initial order of 22 Tanks as part of a pilot project .
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