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Nancy Inc., a manufacturing firm, is able to produce 1,500 T-shirts per hour, at maximum efficiency. There are three eight-hour shifts each day. Due to unavoidable operating interruptions, production averages 1,200 units per hour and on average half an hour maintenance is required in each shift. The plant actually operates only 25 days per month. Based on the year 2020 budget, Nancy estimates that it will be able to sell only 625,000 units per month this year due to the entry of a competitor with aggressive marketing capabilities. However, the demand is unlikely to be affected in future and will be around 650,000 per month in the long run. Assume a calendar year of 360 days and 30 days per month.

Nancy Inc., a manufacturing firm, is able to produce 1,500 T-shirts per hour, at maximum efficiency. There are three eight-hour shifts each day. Due to unavoidable operating interruptions, production averages 1,200 units per hour and on average half an hour maintenance is required in each shift. The plant actually operates only 25 days per month. Based on the year 2020 budget, Nancy estimates that it will be able to sell only 625,000 units per month this year due to the entry of a competitor with aggressive marketing capabilities. However, the demand is unlikely to be affected in future and will be around 650,000 per month in the long run. Assume a calendar year of 360 days and 30 days per month.

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter8: Budgeting For Planning And Control
Section: Chapter Questions
Problem 11CE: Shalimar Company manufactures and sells industrial products. For next year, Shalimar has budgeted...
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  • Determine the budgeted capacity level (in units) under:
    • Theoretical capacity 
    • Practical capacity 
    • Normal capacity utilization
    • Master-budget utilization
Nancy Inc., a manufacturing firm, is able to produce 1,500 T-shirts per hour, at maximum efficiency. There are three eight-hour shifts each day. Due to unavoidable operating interruptions, production averages 1,200 units per hour and on average half an hour maintenance is required in each shift. The plant actually operates only 25 days per month. Based on the year 2020 budget, Nancy estimates that it will be able to sell only 625,000 units per month this year due to the entry of a competitor with aggressive marketing capabilities. However, the demand is unlikely to be affected in future and will be around 650,000 per month in the long run. Assume a calendar year of 360 days and 30 days per month.
Transcribed Image Text:Nancy Inc., a manufacturing firm, is able to produce 1,500 T-shirts per hour, at maximum efficiency. There are three eight-hour shifts each day. Due to unavoidable operating interruptions, production averages 1,200 units per hour and on average half an hour maintenance is required in each shift. The plant actually operates only 25 days per month. Based on the year 2020 budget, Nancy estimates that it will be able to sell only 625,000 units per month this year due to the entry of a competitor with aggressive marketing capabilities. However, the demand is unlikely to be affected in future and will be around 650,000 per month in the long run. Assume a calendar year of 360 days and 30 days per month.
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