Calculate the direct materials costs, Managerial Accounting

XYZ Industries manufactures electronic testing equipment. XYZ also installs the equipment at customers' sites and ensures that it functions smoothly. Additional information on the Manufacturing and Installation departments is as follows (capacities are expressed in terms of the number of units of electronic testing equipment):

                                                                  Equipment                   Equipment

                                                                  Manufactured             Installed             

 

Annual capacity                                          400 units per year        300 units per year

Equipment manufactured and installed          300 units per year        300 units per year

 

XYZ manufactures only 300 units per year because the Installation Department has only enough capacity to install 300 units. The equipment sells for $40,000 per unit (installed) and has direct materials costs of $15,000. All costs other than direct materials costs are fixed. The following requirements refer only to the preceding data. There is no connection between the requirements.

REQUIRED

1. XYZ's engineers have found a way to reduce equipment manufacturing time. The new method would cost an additional $50 per unit and would allow XYZ to manufacture 20 additional units a year. Should XYZ implement the new method? Show your calculations.                                                    

2. XYZ's designers have proposed a change in direct materials that would increase direct materials costs by $2,000 per unit. This change would enable XYZ to install 320 units of equipment each year. If XYZ makes the change, it will implement the new design on all equipments sold. Should XYZ use the new design? Show your calculations.

3. A new installation technique has been developed that will enable XYZ's engineers to install 10 additional units of equipment a year. The new method will increase installation costs by $50,000 each year. Should XYZ implement the new technique? Show your calculations.                                           

4. XYZ is considering how to motivate workers to improve their productivity (output per hour). One proposal is to evaluate and compensate workers in the Manufacturing and Installation departments on the basis of their productivities. Do you think the new proposal is a good idea? Explains briefly.

Posted Date: 2/23/2013 6:02:57 AM | Location : United States







Related Discussions:- Calculate the direct materials costs, Assignment Help, Ask Question on Calculate the direct materials costs, Get Answer, Expert's Help, Calculate the direct materials costs Discussions

Write discussion on Calculate the direct materials costs
Your posts are moderated
Related Questions
given a scenario when iddle capacity is less than the special order.in this case should we accept or reject the order

BENCH MARKING In the current business environment, organizations are under a lot of pressure to improve performance and that of their divisions or subsidiaries. Bench marking i

Parameter prediction error: This is another aspect of faulty planning. As Hongren says, ‘planning decisions are based on predictions of future costs, future selling price, fut

Gather Data about Alternatives When potential areas of activity are specified, management must assess the potential growth rate of the activities, the capability of the company

1. In order to boost the housing market throughout 2009 and into 2010, the federal government offered a tax credit to first-time home buyers and some repeat buyers.

Classification of ratio according to significance   The ratios have also been classified according to their significance. Some ratios are more important than other and the fir

C-V-P ANALYSIS – MULTIPLE PRODUCTS The simple product CVP analysis can be extended to handle the more realistic situations where the firm produces more than one product. The o