A company currently using an inspection process in its material receiving department istrying to install an overall cost reduction program. One possible reduction is the eliminationof one inspection position. This position tests material that has a defective content onthe average of 0.04. By inspecting all items, the inspector is able to remove all defects.The inspector can inspect 50 units per hour. The hourly rate including fringe benei ts forthis position is $9. If the inspection position is eliminated, defects will go into productassembly and will have to be replaced later at a cost of $10 each when they are detectedin i nal product testing.a. Should this inspection position be eliminated?b. What is the cost to inspect each unit?c. Is there benei t (or loss) from the current inspection process? How much?
A company currently using an inspection process in its material receiving department istrying to install an overall cost reduction program. One possible reduction is the eliminationof one inspection position. This position tests material that has a defective content onthe average of 0.04. By inspecting all items, the inspector is able to remove all defects.The inspector can inspect 50 units per hour. The hourly rate including fringe benei ts forthis position is $9. If the inspection position is eliminated, defects will go into productassembly and will have to be replaced later at a cost of $10 each when they are detectedin i nal product testing.a. Should this inspection position be eliminated?b. What is the cost to inspect each unit?c. Is there benei t (or loss) from the current inspection process? How much?
Financial And Managerial Accounting
15th Edition
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:WARREN, Carl S.
Chapter18: Activity-based Costing
Section: Chapter Questions
Problem 13E: Handbrain Inc. is considering a change to activity-based product costing. The company produces two...
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| A company currently using an inspection process in its material receiving department is trying to install an overall cost reduction program. One possible reduction is the elimination of one inspection position. This position tests material that has a defective content on the average of 0.04. By inspecting all items, the inspector is able to remove all defects. The inspector can inspect 50 units per hour. The hourly rate including fringe benei ts for this position is $9. If the inspection position is eliminated, defects will go into product assembly and will have to be replaced later at a cost of $10 each when they are detected in i nal product testing. a. Should this inspection position be eliminated? b. What is the cost to inspect each unit? c. Is there benei t (or loss) from the current inspection process? How much? |
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