Instruction: Show complete solution including the cash flow diagram if not given, Formula function, Formula, Values of factors upto 4 decimal digits, Final answer is box and rounded to 2 decimal places and Recommendation is Boxed Two alternative designs are under consideration for a tapered fastening pin. The fastening pins are sold for $0.70 each. Either design will serve equally well and will involve the same material and manufacturing cost except for the lathe and drill operations. Design A will require 12 hours of lathe time and 8 hours of drill time per 1000 units. The variable operating cost of the lathe including labor is $18.60 per hour. The variable cost of the drill including labor is $16.90 per hour. Finally, there is a sunk cost of $5000 for Design A and $9000 for Design B due to obsolete tooling. Which design should be adopted if 125000 units are sold each year and what is its annual savings over the other design?

Instruction: Show complete solution including the cash flow diagram if not given, Formula function, Formula, Values of factors upto 4 decimal digits, Final answer is box and rounded to 2 decimal places and Recommendation is Boxed Two alternative designs are under consideration for a tapered fastening pin. The fastening pins are sold for $0.70 each. Either design will serve equally well and will involve the same material and manufacturing cost except for the lathe and drill operations. Design A will require 12 hours of lathe time and 8 hours of drill time per 1000 units. The variable operating cost of the lathe including labor is $18.60 per hour. The variable cost of the drill including labor is $16.90 per hour. Finally, there is a sunk cost of $5000 for Design A and $9000 for Design B due to obsolete tooling. Which design should be adopted if 125000 units are sold each year and what is its annual savings over the other design?

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 2PB

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