Reference no: EM131230647
Relevant Cost Case Behemoth Motors Corp.
Behemoth Motors Corp. (BMC) is a major manufacturer of automobiles in the United States. BMC has decided to include a Global Positioning System navigator (GPSN) in all of its Sports Utility Vehicles (SUV) beginning with the 2016 model year. These models are just now being delivered and the GPSN units are manufactured in the Detroit BMC facility.
Currently and for the foreseeable future, BMC will need 8,000 GPSNs per month. The total manufacturing cost of the GSPN is $425 per unit calculated as follows:
|
Item
|
Cost per unit
|
|
Direct materials (purchased locally)
|
$165
|
|
Direct labor (6 hours @ $28 per hour)
|
$168
|
|
Factory Floor Space Charges (16,000 sq. ft. at $2.50 per sq. ft. per month allocated over 8,000 units per month)
|
$5
|
|
Supervisory labor (monthly cost of $56,000 allocated over 8,000 units per month)
|
$7
|
|
General company overhead ($640,000 per month assigned to GPSN allocated over 8,000 units per month)
|
$80
|
|
Total Unit Cost
|
$425
|
BMC experiences a high level of quality control over these units with only 2% of total production failing quality control testing. 98% of all units manufactured are installed in SUVs.
Wally Wizard, the GPSN manager, has been approached by Far East Enterprises, Ltd (FEE) who has offered to outsource these units for MBC. FEE is a three-year-old electronic manufacturing company located in China and has experienced outstanding growth during that three-year period. FEE has offered to manufacture and deliver to Detroit 8,000 GPSN units at a unit cost of $400 beginning on Jan. 1, 2016. FEE asks for a two-year contract.
Under the existing arrangement, the direct materials are all purchased locally under month-to-month contracts. There are no future obligations under these contracts.
There are 100 direct labor employees involved in this process. These employees can be laid off but if they are, BMC must pay a penalty of $66,000 per year to the employees union. This penalty will continue for 4 years.
There are 10 supervisors, each earning $6,000 per month, assigned to the project. If the product is outsourced, all of these supervisors can be assigned to other supervisory positions within BMC.
If the product is outsourced, half of the factory floor space can be used for storage for materials that are currently stored in rented storage facilities. These rented facilities currently cost BMC $5,000 per month. There is no alternative use for the remaining factory floor space. The current $2.50 per sq. ft. charge is based on the overall BMC factory costs.
General company overhead is first assigned to operating units on the basis of total product produced and then further to produced units on a per unit basis. If the product is outsourced, this overhead will be reassigned to other operating divisions although total corporate overhead incurred will remain unchanged.
You have determined the following additional facts. The units manufactured by FEE will have the same quality as those manufactured by BMC and the delivery schedule will have the same reliability as that of BMC.
Case Assignment
Make a recommendation to Wally Wizard in a 3- to 4-page paper. Be sure to support your recommendation with the decision-making process outlined in the background information.
Assignment Expectations
It is important to answer the questions above. The discussion should be three to four pages and written in a clear and concise manner. Support your discussion with references in APA format. You are encouraged to use Excel or other compatible spreadsheet when computations are involved.
When your paper is done, upload it to the appropriate dropbox.
|
What changes might you make to increase fiber in your diet
: What changes might you make to increase the fiber in your diet? How might insufficient or excessive amounts of proteins, carbohydrates, fats, or fiber contribute to health or illness? Provide examples.
|
|
What you felt concerning the authors point of view
: Brief statement about what you felt concerning the author's point of view - Was the presentation objective and factual or was the presentation subjective and lacking of facts? Explain your opinion.
|
|
What is the maximum loss that could occur for purchaser
: How are call options used by speculators? - What is the maximum loss that could occur for a purchaser of a call option?
|
|
Describe condition under which their strategy would backfire
: Describe the conditions under which their strategy would backfire. - What is the maximum loss that could occur for a purchaser of a put option?
|
|
Decision-making process outlined in background information
: Basis of total product produced and then further to produced units on a per unit basis. If the product is outsourced, this overhead will be reassigned to other operating divisions although total corporate overhead incurred will remain unchanged.
|
|
How is it administered and scored
: Under what circumstances would you give this test? Provide example scenarios in which the test would be helpful to another mental health professional, parent, teacher, student, individual, court, business, or other profession?
|
|
How energy flow in your local ecosystem related to logging
: Create a PowerPoint presentation about your selected environmental issue. How energy and materials flow in your local ecosystem related to logging/deforestation.
|
|
Remove any duplicates from a sequence of numbers
: Write a program to remove any duplicates from a sequence of numbers. For example, if the list consisted of the numbers 5, 4, 5, 5, and 3, the program would output 5, 4, 3.
|
|
Prepare the journal entries for the years ending
: ACT204 FINANCIAL ACCOUNTING ASSIGNMENT. Driver Ltd signs a five year lease agreement with Bakewell Ltd on 1st July 2019. The lease is for new equipment which has at the star of the lease a fair value of $341,755. Prepare the Journal entries for the..
|