Answered: A manufacturer has a contract to…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 1PB: Variety Artisans has a bottleneck in their production that occurs within the engraving department....

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A manufacturer has a contract to produce 5,000 units of a certain device. The device can
be made by highly-trained workmen working individually. The device can also be made
by less-skilled workmen working together if they are given a specialized equipment and
proper supervision. The highly-trained workmen are paid P20.00 per hour, and each can
produce one unit every 2 hours, on the average.
The specialized equipment can be placed in operation at an original cost of
P60,000 and it will be worthless at the time all the 5,000 units are manufactured. With this
equipment four men, paid P15.00 each per hour, and a foreman, paid P25.00 per hour,
can do the work. All the five men working together can finish one unit in 15 minutes.
Determine the gain or loss if the specialized equipment is used.

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