# Equipment Manufactured285 units per year250 units per yearEquipment Installed250 units per year250 units per yearAnnual capacityEquipment manufactured and installed 1. Washington's engineers have found a way to reduce equipment manufacturing time. The new methodwould cost an additional \$500 per unit and would allow Washington to manufacture 30 additional unitsa year. Should Washington implement the new method? Show your calculations.2. Washington's designers have proposed a change in direct materials that would increase direct mate-rial costs by \$2,000 per unit. This change would enable Washington to install 285 units of equipmenteach year. If Washington makes the change, it will implement the new design on all equipment sold.Should Washington use the new design? Show your calculations.3. A new installation technique has been developed that will enable Washington's engineers to install 7additional units of equipment a year. The new method will increase installation costs by \$145,000 eachyear. Should Washington implement the new technique? Show your calculations.4. Washington is considering how to motivate workers to improve their productivity (output per hour).One proposal is to evaluate and compensate workers in the manufacturing and installation depart-ments on the basis of their productivities. Do you think the new proposal is a good idea? Explain briefly.Required

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Theory of constraints, throughput margin, and relevant costs. Washington Industries manufactures electronic testing equipment. Washington also installs the equipment at customers’ sites and ensures that it functions smoothly. Additional information on the manufacturing and installation departments is as follows (capacities are expressed in terms of the number of units of electronic testing equipment):

Washington manufactures only 250 units per year because the installation department has only enough capacity to install 250 units. The equipment sells for \$55,000 per unit (installed) and has direct material costs of \$30,000. All costs other than direct material costs are fixed. The following requirements refer only to the preceding data. There is no connection between the requirements.

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Step 1

Relevant Cost: Relevant cost is the avoidable cost which incurred at the time of the decision making process of the management. It means that the cost related to the decision making process is called relevant cost.

Irrelevant Cost: Irrelevant cost is that cost which is not affected of the decision making process of the management because this cost are those which already has been incurred

Variable Cost: The Variable cost is that cost which varies with increase or decrease in the level of production. The Variable cost of per unit remains same. Here, it can be said that variable cost has the positive relationship with output of production.

Fixed Cost: The Fixed cost is that cost which does not change with increase or decrease in the level of the production, but per unit fixed changes with change in the level production. Examples of the fixed cost are rent, wages and insurance.

Step 2

1.

Identify whether the new method should be implemented or not.

Step 3

Conclusion:

Hence, the additional income of the firm is (\$140,000). This is the loss for the f...

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