What is the profit per day of Machine A? 2. What is the profit per day of Machine B? 3. What would the percent of parts rejected have to be for Machine B to be as profitable as Machine A?
What is the profit per day of Machine A? 2. What is the profit per day of Machine B? 3. What would the percent of parts rejected have to be for Machine B to be as profitable as Machine A?
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 25P
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Question
1. What is the profit per day of Machine A?
2. What is the profit per day of Machine B?
3. What would the percent of parts rejected have to be for Machine B to be as profitable as Machine A?
Transcribed Image Text:Two currently owned machines are being considered for the production of a part.
The capital investment associated with the machines is about the same. The
important differences between the machines are their production capacities
(production rate x available production hours) and their reject rates (percentage of
parts produced that cannot be sold). The material cost is P300.00 per part, and all
defect-free parts produced can be sold for P600 each. (Rejected parts have
negligible scrap value.) For either machine, the operator cost is P750.00 per hour
and the variable overhead rate for traceable costs is P250.00 per hour. Considering
the table below:
Production Rale
Hours available for production
Percent ports rejected
Mochine A
100 paris/tx
7 hours/day
10%
Machine B
130 purls/h
6 hours/day
13%
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