Padre works for a trade magazine that publishes lists of power-sizing exponents (PSE) that reflect economies of scale for developing engineering esti- mates of various types of equipment. Padre has been unable to find any published data on the VMIC machine and wants to list its PSE value in his next issue. Given the following data calculate the PSE value that Padre should publish. (Note: The VMIC- 100 can handle twice the volume of a VMIC-50.) Cost of VMIC-100 today $250,000 Cost of VMIC-50 5 years ago $95,000 VMIC equipment index today = 350 VMIC equipment index 5 years ago = 235

Padre works for a trade magazine that publishes lists of power-sizing exponents (PSE) that reflect economies of scale for developing engineering esti- mates of various types of equipment. Padre has been unable to find any published data on the VMIC machine and wants to list its PSE value in his next issue. Given the following data calculate the PSE value that Padre should publish. (Note: The VMIC- 100 can handle twice the volume of a VMIC-50.) Cost of VMIC-100 today $250,000 Cost of VMIC-50 5 years ago $95,000 VMIC equipment index today = 350 VMIC equipment index 5 years ago = 235

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter18: Pricing And Profitability Analysis

Section: Chapter Questions

Problem 13E

See similar textbooks

Similar questions

A mechanical engineer is considering two types of pressure sensors for the low-pressure steam lines in several of the company plants. Piezoresistive sensors use the change in conductivity of semiconductors to measure the pressure. Fiber optic sensors use the properties of fiber optic interferometers to sense nanometer scale displacement of membranes. The costs for each system are shown below. Which should be selected based on a present worth comparison at an interest rate of 1% per month?
Kagle design engineers are in the process of developing a new green product, one that will significantly reduce impact on the environment and yet still provide the desired customer functionality. Currently, two designs are being considered. The manager of Kagle has told the engineers that the cost for the new product cannot exceed 550 per unit (target cost). In the past, the Cost Accounting Department has given estimated costs using a unit-based system. At the request of the Engineering Department, Cost Accounting is providing both unit-and activity-based accounting information (made possible by a recent pilot study producing the activity-based data). Unit-based system: Variable conversion activity rate: 100 per direct labor hour Material usage rate: 20 per part ABC system: Labor usage: 15 per direct labor hour Material usage (direct materials): 20 per part Machining: 75 per machine hour Purchasing activity: 150 per purchase order Setup activity: 3,000 per setup hour Warranty activity: 500 per returned unit (usually requires extensive rework) Customer repair cost: 25 per repair hour (average) Required: 1. Select the lower-cost design using unit-based costing. Are logistical and post-purchase activities considered in this analysis? 2. Select the lower-cost design using ABC analysis. Explain why the analysis differs from the unit-based analysis. 3. What if the post-purchase cost was an environmental contaminant and amounted to 10 per unit for Design A and 40 per unit for Design B? Assume that the environmental cost is borne by society. Now which is the better design?
You are a head of division in Kinetic Robotics Ltd, a large robotics company, and your team has put together a project proposal to develop a new home robot. The expected NPV of the project is $17.7 million, and the project will require 50 engineers. Your division has a total of 190 engineers available, and the project must compete with the following other projects for these engineering resources:
Ned Thompson Labs performs tests on superalloys, titanium, aluminum, and most metals. Tests on metal composites that rely upon scanning electron microscope results can be subcontracted or the labs can purchase new equipment. Evaluate the sensitivity of the economic decision to purchase the equipment over a range of ±20% (in 10% increments)of the estimates for P, AOC, R, n, and MARR (range on MARR is 12% to 18%). Use the AW method and plot the results on a sensitivity graph. For which parameter(s) is the AW most sensitive? least sensitive? First cost, P = $-180,000 Salvage, S = $20,000 Life, n = 10 years Annual operating cost, AOC=$-30,000 per year Annual revenue, R = $70,000 per year MARR = 15% per year
GeoWorld Systems uses a subset of the following questions during the interview process for new engineers. For each of the following cases, determine if “the project” or “do nothing” is preferred. The value of MARR in each case is 14%.
Kagle design engineers are in the process of developing a new “green” product, one that will significantly reduce impact on the environment and yet still provide the desired customer functionality. Currently, two designs are being considered. The manager of Kagle has told the engineers that the cost for the new product cannot exceed $550 per unit (target cost). In the past, the Cost Accounting Department has given estimated costs using a unit-based system. At the request of the Engineering Department, Cost Accounting is providing both unit- and activity-based accounting information (made possible by a recent pilot study producing the activity-based data). Unit-based system:Variable conversion activity rate: $100 per direct labor hourMaterial usage rate: $20 per partABC system:Labor usage: $15 per direct labor hourMaterial usage (direct materials): $20 per partMachining: $75 per machine hourPurchasing activity: $150 per purchase orderSetup activity: $3,000 per setup hourWarranty…
Vince Malloy and Katy Smith, both systems personnel at Shamrock Steelworks, are designing a new expenditure cycle system. Vince has worked for Shamrock for 12 years and has been involved in many systems development projects. Katy recently began working for Shamrock. She has 4 years of experience in systems development with another comparably sized organization. Yesterday, Vince and Katy met to determine their plan for approaching the conceptual system design. Following is an excerpt of some dialogue that occurred in that meeting.Katy: I really think that the new system can be designed more efficiently if we use an object-oriented design approach. Further, future enhancements and maintenance will be easier if we use an object approach.Vince: The method you are suggesting is a creation of modules. I do not have a problem with that concept in general. I just prefer using a top-down approach to design the system. We have been using that system for the past 12 years, and it has worked out…
Herme, the quarry supervisor for Espinosa Stone, wants to select the more economical of two alternatives for quarry dust control. Help him perform a spreadsheet-based AW evaluation for the estimates with MARR = 12% per year.
A process control manager is considering two robots to improve materials handling capacity in the production of rigid shaft couplings that mate dissimilar drive components. Robot X has a first cost of $84,000, an annual M&O cost of $31,000, a $40,000 salvage value, and will improve revenues by $96,000 per year. Robot Y has a first cost of $146,000, an annual M&O cost of $28,000, a $47,000 salvage value, and will increase revenues by $119,000 per year. The company’s MARR is 15% per year and it uses a 3-year study period for economic evaluations. Which one should the manager select (a) on the basis of ROR values, and (b) on the basis of the incremental ROR value? (c) Which is the correct selection basis? Perform the analysis by hand or spreadsheet, as instructed.
As CEO of Riverside Marine, Rachel Moore knows it is important to control costs and to respond quickly to changes in the highly competitive boat-building industry. When Gerbig Consulting proposes that Riverside Marine invest in an ERP system, she forms a team to evaluate the proposal: the plant engineer, the plant foreman, the systems specialist, the human resources director, the marketing director, and the management accountant. A month later, the management accountant Miles Cobalt reports that the team and Gerbig estimate that if Riverside Marine implements the ERP system, it will incur the following costs: Costs of the Project a.$390,000 in software costs b. $85,000 to customize the ERP software and load Riverside Marine'sdata into the new ERP system c. $112,000 for employee training Benefits of the Project a. More efficient order processing should lead to savings of $185,000. b. Streamlining the manufacturing process so that it maps into the ERP…
Premo Pens, Inc., is in the process of developing a newpen to replace its existing top-of-the-line Executive Model.Market research has identified the critical features the pen must have, and it is estimated that customers would be will-ing to pay $30 for a pen with these features. Premo’s produc-tion manager estimates that with existing equipment it will cost $26 to produce the proposed model. The current Execu-tive Model sells for $24 and has a total production cost of $20. A competitor sells a pen similar to the proposed model,but without Premo’s patented easy retract feature, for $28. Itis estimated to cost the competitor $25 to produce. If Premoseeks to earn a 20 percent return on sales on the new model,which of the following represents the target cost for the newpen?a. $26.00.b. $22.40.c. $24.00.d. $19.80.
At Jeekes PolyChem Products LLC, customers needs are translated into product specifications by the design or engineering department. Which of the following objectives of production management is addressed by Jeekes Polychem Products LLC? a. Right time b. Right quality c. Right quantity d. Right cost Mr. Saud bought a new mobile phone for himself. He explained to his friend that the mobile phone has a camera, Facebook facility, and music facility in addition to the basic functions like phone calls and messaging. Which dimension of "product quality" is Mr. Saud referring to? a. Features b. Aesthetics c. Reputation d. Conformance