Question
The Xtra manufactures an entry-level hoverboard, HOV-X. Pursuing a cost-leadership strategy, the company has tried to improve quality and reduce costs. As a result
The Xtra manufactures an entry-level hoverboard, HOV-X. Pursuing a cost-leadership strategy, the company has tried to improve quality and reduce costs. As a result of the actions taken over the last year, quality has significantly improved in 2020 while rework and unit costs of the HOV-X have decreased. Xtra has reduced manufacturing capacity because capacity is no longer needed to support rework. Xtra has also lowered HOV-X's selling price to gain market share and unit sales have increased. Information about the current period (2020) and last period (2019) follows: (Click the icon to view the information.) (Click the icon to view additional information.) Read the requirements. Requirement 1. Calculate the amount and cost of (a) unused manufacturing capacity and (b) unused selling and customer-service capacity at the beginning of 2020 based on actual production and actual number of customers served in 2020. First, calculate the amount and cost of (a) unused manufacturing capacity. Amount of unused capacity Total support costs 55 = Cost of unused capacity Now calculate the amount and cost of (b) unused selling and customer-service capacity. The amount of unused selling and customer-service capacity is customer-service capacity is customers and the cost of unused selling and Requirement 2. Suppose Xtra can add or reduce its selling and customer-service capacity in increments of 10 customers. What is the maximum amount of costs that Xtra could save in 2020 by downsizing selling and customer-service capacity? Xtra can reduce selling and customer-service capacity by another This is the maximum amount of costs Xtra can save in 2020. customers. Xtra will save another
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