Kitchen Helper Company decides to produce and sell food blenders and is considering three different types of production facilities ("plants"). Plant A is a labor-intensive facility, employing relatively little specialized capital equipment. Plant B is a semi-automated facility that would employ less labor than A but would also have higher capital equipment costs. Plant Cis a completely automated facility using much more high-cost, high-technology capital equipment and even less labor than B. Information about the operating costs and production capacities of these three different types of plants is shown in the following table. Unit variable costs Material $3.50 $3.25 $3.00 Labor $4.50 $3.25 $2.00 Overhead $1.00 $1.50 $2.00 Total $9.00 $8.00 $7.00 Annual fixed costs Depreciation $60,000 $100,000 $200,000 Capital $30,000 $50,000 $100,000 Overhead $60,000 $100,000 $150,000 Total $150,000 $250,000 $450,000 Annual capacity 75,000 150,000 350,000

Kitchen Helper Company decides to produce and sell food blenders and is considering three different types of production facilities ("plants"). Plant A is a labor-intensive facility, employing relatively little specialized capital equipment. Plant B is a semi-automated facility that would employ less labor than A but would also have higher capital equipment costs. Plant Cis a completely automated facility using much more high-cost, high-technology capital equipment and even less labor than B. Information about the operating costs and production capacities of these three different types of plants is shown in the following table. Unit variable costs Material $3.50 $3.25 $3.00 Labor $4.50 $3.25 $2.00 Overhead $1.00 $1.50 $2.00 Total $9.00 $8.00 $7.00 Annual fixed costs Depreciation $60,000 $100,000 $200,000 Capital $30,000 $50,000 $100,000 Overhead $60,000 $100,000 $150,000 Total $150,000 $250,000 $450,000 Annual capacity 75,000 150,000 350,000

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter17: Activity Resource Usage Model And Tactical Decision Making

Section: Chapter Questions

Problem 18E: A company is considering a special order for 1,000 units to be priced at 8.90 (the normal price...

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