Soal 7 Decision Making

It defines the expenditures and also denotes the possibility of cost reductions from the supplier’s marketing representative. This, for simplicities sake, can be possibly noted as the better of the two. The overall unit price $31.27, and with the tooling cost of $ 6,000 and 5,000 units delivered, the initial cost would be $162,350 for the first delivery (see figure 1). The $6,000 being a onetime fee for the re-tooling will only be charged during the first delivery, or may be spaced out over the course of several installments. Regardless, the re-tooling fee is not factored into the cost per unit as there is no length of time set for the contracting. With Original Wire being a local vendor, close buyer-seller relations may result from a long-term contract with price reductions. Since Original Wire claims it is ‘hungry’ for business, there is the possibility of some price negotiations as well. (Monczka, Handfield, Giunipero, Patterson, Purchasing and Supply Chain Management, 2011, pgs 805)

One of the major benefits of expansion is the reduction of fixed cost (fixed and selling). The cost is absorbed by 85,000 units instead of 80,000 units resulting in saving of $0.42 per unit.

In the same way should be treated cost of $1 million related to dismantlement of the existing manufacturing operation. According to the ASC 420-10-24-14, this cost

1) In this exercise, you viewed the settlement of costs to finished goods and manufactured output settlement. As noted in the exercise, each should be for $42,000.

Steve was concerned about the potential loss of customers and suggested that Prairie Winds purchase a second pasta production machine for $40 million. The company had excess space in the existing facility that could be used for the new machinery. However, this space currently was leased to another company on a year-to-year basis and was generating annual rent of

Ten years ago our electric motor business was in real trouble. Low labor rates allowed the Eastern Bloc countries to sell standard motors at prices we were unable to match. We had become the high-cost producer in the industry. Consequently, we decided to change our strategy and become a specialty motor producer. Once we adopted our new strategy, we discovered that while our existing cost system was adequate for costing standard motors, it was giving us inaccurate information when we used it to cost specialty motors.

In order to meet customer demands for higher product quality, to comply with federally-mandated environmental regulations, and to reduce production costs, HCC must spend $2,000,000 within the next three years to upgrade equipment. The upgrade is expected to result in production efficiencies that will lower material and labor costs by reducing defective products, process waste, in-process inventory, and production man-hours through simplified work processes. It has been over a decade since significant modifications were made to the production facilities. Those changes were mostly technical in nature and did not substantially alter work processes or reduce overall employment. The average productivity gain in the industry for the past five years has been 3% per year. Financing for the loan to purchase the equipment

Bernie and Vivian meet and negotiate a selling price of $12,500. Vivian has requested an additional three weeks to obtain the funds to purchase the vehicle. Bernie agrees to the extension of time but requires a deposit of $1,000. Vivian agrees to the terms.

In reviewing the proposal presented by Pressco, Inc. to provide new mechanical drying equipment at a cost of $2.9 million I have considered the cash flow implications of the purchase in terms of present value of the investment and estimated resulting savings, as well as possible alternatives to purchase, and the current political climate as it affects the business issues of taxation and energy policy.

Estimated machinery life: 3 years (after which there will be zero value for the equipment and no further cost savings)

This memo is in lieu of missing receipt/invoice for the Cleaverbridge purchase on behalf of the Craftsman program in the amount of $2,693.99. The purchase was conducted with MAXQDA online and the only documents that we can produce are the Amex statement and the MAXQDA confirmation of the purchase which neither give a detail account of the purchase with the prices of each line item.

Under the existing cost system for the turning machine area, there are two direct costs and three cost pools for overhead costs. The two direct costs are simply Direct Labor and Direct Material, which are traced to the cost object, which is Machine Parts. The total overhead is split into three cost pools, which are the following: overhead applied on direct labor, overhead applied on material dollars, and overhead applied on ACTS machine hours. Furthermore, each cost pool is broken down into direct and period sub categories. The mentioned cost pools for the following cost drivers: Direct Labor dollars, Material dollars, and machine hours.

ML had developed a policy of selling manual machines and renting automatic machines. Manual machines did not cost much, did not require service, and could be modified to attach different fasteners inexpensively. Automatic machines were rented on an annual basis because they would have been more expensive to sell and it provided annual income to ML. However, about 700 of the rented machines were returned each year. During the time that machines were in inventory, ML would modify the machines to attach different fasteners. This was expensive with an average cost per modification of $2000. If all 700 machines were modified during a given year this would have cost $1.4 million per year. It was also industry practice to provide preventative maintenance and

Another way for Standard to remedy this pricing situation is to offer additional services along with its milling machine in order to further differentiate themselves from their competitors. Standard’s package could include an unlimited warrantee for a specified amount of time greater than that of its competitor, and an increase in on site

The optimal product mix for Merton given their current product mix and constraints has been determined, but Merton is also considering the addition of a new Model 103. The values for contribution margin (CM) are given as well as the portion of departmental capacity required to produce 103. Based on the capacity information, it was determined that Model 103 would require 0.8 hours of Engine Assembly, 1.5 hours of Metal Stamping, and 1 hour of Model 101 Assembly per truck. The constraints and objective function were modified with these new values and run in Excel’s Solver, which determined that Model 103 should not be produced (Exhibit 5). Exhibit 6 provides a sensitivity report indicating a reduced cost of -$350, meaning that the CM of Model 103 would need to increase by $350 before it would make sense for Merton to begin producing Model 103.