Calculate the pre-maintenance cost per unit for the product.

Question

Prior to install a JIT system, Buckner Company, a producer of automobile parts, used maintenance hours to assign maintenance costs to its three products (wheels, rims, and ball bearings). The maintenance costs totaled $12,000,000 per year. The machine hours used by each product and the quantity produced of each product are as follows: Wheels: Machine hours: 150,000 Qnty produced: 187,500 Rims: Machine hours: 300,000 Qnty produced: 281,250 Bearings: Machine hours: 350,000 Qnty produced: 350,000 After installing JIT, three manufacturing cells were created and the cell workers were trained to perfom preventive maintenance and minor repairs. A full-time maintenance person was also assigned to each cell. Maintenance costs for the three cells still totaled $12,000,000; however, these costs are now treaceable to each cell as follows: Cell, wheels: $2,640,000 Cell, rims: 4,560,000 Cell, bearings: 5,600,000 1) Compute the pre-JIT maintenance cost per unit for each product (round answers to two…

Answer 1

Question

Chapter 11, Problem 14E

1.

To determine

Calculate the pre-maintenance cost per unit for the product.

2.

To determine

Calculate the post-purchase cost per unit of the products.

3.

To determine

Describe the reason for maintenance cost per unit is more accurate than pre cost.

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