In XYZ company an annual demand for a machine part is 100,000 units. The part is produced on a high-speed lathe, using 1112 screw-machine steel costing ₱15 per pound. A study was conducted to determine whether it might be cheaper to use brass screw stock, costing ₱72 per pound. Because the weight of steel required per piece was 0.0353 pounds and that of brass was 0.0384 pounds, the material cost per piece was ₱0.50 for steel and ₱75 for brass. However, when the manufacturing engineering department was consulted, it was found that, although 57.1 defect free parts per hour were being produced by using steel, the output would be 102.9 defect-free parts per hour if brass were used. Which material should be used for this part? Machine attendant was paid ₱760/hour, and the variable overhead costs for the turret were estimated to be ₱510/hour.
In XYZ company an annual demand for a machine part is 100,000 units. The part is produced on a high-speed lathe, using 1112 screw-machine steel costing ₱15 per pound. A study was conducted to determine whether it might be cheaper to use brass screw stock, costing ₱72 per pound. Because the weight of steel required per piece was 0.0353 pounds and that of brass was 0.0384 pounds, the material cost per piece was ₱0.50 for steel and ₱75 for brass. However, when the manufacturing engineering department was consulted, it was found that, although 57.1 defect free parts per hour were being produced by using steel, the output would be 102.9 defect-free parts per hour if brass were used. Which material should be used for this part? Machine attendant was paid ₱760/hour, and the variable overhead costs for the turret were estimated to be ₱510/hour.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter15: Lean Accounting And Productivity Measurement
Section: Chapter Questions
Problem 13E: Carsen Company produces handcrafted pottery that uses two inputs: materials and labor. During the...
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In XYZ company an annual demand for a machine part is 100,000 units. The part is produced on a high-speed lathe, using 1112 screw-machine steel costing ₱15 per pound. A study was conducted to determine whether it might be cheaper to use brass screw stock, costing ₱72 per pound. Because the weight of steel required per piece was 0.0353 pounds and that of brass was 0.0384 pounds, the material cost per piece was ₱0.50 for steel and ₱75 for brass.
However, when the manufacturing engineering department was consulted, it was found that, although 57.1 defect free parts per hour were being produced by using steel, the output would be 102.9 defect-free parts per hour if brass were used. Which material should be used for this part?
Machine attendant was paid ₱760/hour, and the variable overhead costs for the turret were estimated to be ₱510/hour.
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