User Account

All Pages

Throughput Accounting, Cost Accounting

Assignment Help:
Image Is Everything, Inc. (IIE) is located in an emerging market. It specializes in lithographic duplication, catering to demands from the nouveau riche for reproductions of paintings by artists such as Rembrandt, Picasso, Van Gogh, etc. Being the only game in the country, where millionaires are born every minute, IIE finds that demand outstrips capacity. IIE has a demand for 750 reproductions (jobs) every month. It charges $500 per job.

The painting reproduction process involves two steps, a “Preprint” step (the PP step), followed by a “Makeready & Print” step (the MP step). The footnote briefly explains these steps. Read it later if you wish to; you do not need to read it for this assignment. Both the PP step and the MP step require expensive, difficult-to-acquire, equipment and IIE has somehow smuggled one of each into the country. Each step requires a skilled artist. IIE operates two 10-hour shifts each day, 25 days a month. Each of the 4 artists employed full-time by IIE is paid $100 per day, and reports for work every day without fail. Fixed cost expenses for supervision, rent, etc., amount to $10,000 per month. The cost of materials (inks, paper, solvents, etc.) adds up to $100 per job.
The PP step takes one hour on average. The equipment for this process step breaks down frequently, and it is thus unavailable for 20% of the time. Fortunately, these breakdowns do not affect the quality of a job in process. So, as soon as the equipment comes back up, the job continues from whatever stage it was in before the breakdown, without any problem.
The MP step requires a setup time (“Makeready” time) of 15 minutes per job followed by the print operation that takes 30 minutes per job. In addition, the artist executing this step spends one hour at the start of the shift to flush out all the ink from the equipment’s printing plates.
a. What is the monthly operating profit for IIE?

Mike’s Mechanics, a reputed maintenance company, offers two services to improve IIE’s productivity. For a fee of $5,000 per month it guarantees reducing downtime at the PP step from 20% down to 10%. The other service offered is to install a new Makeready process for a one-time fee of $20,000, which will effectively eliminate both the setup activity required at the beginning of each shift as well as the setups that must be performed for each job.

b. Should IIE contract with Mike’s Mechanics for either of these two services? If so, which one(s) should it write the contract for and what is the new monthly profit?

Snobs, Inc. is a company located near IIE. It approaches IIE for a job that only requires use of the MP process. Snobs wants to contract for as many jobs as IIE can handle over the foreseeable future and offers to pay $200 per job. Snobs will provide all the material needed at no extra cost. Each of Snobs’ jobs requires 30 minutes from the MP process. Assume that the MP process is extremely flexible and can switch between the reproduction work and Snobs’ jobs without any setup delays. Assume that the quality of reproductions is not degraded if there are any delays between the PP step and the MP step. Also assume that processing times are deterministic and so you can load both equipment (PP and MP) to their full capacity without degrading service.

c. Given this new demand, what should IIE do regarding its contract with Mike’s Mechanics? How much more money can it make per month, if at all?

d. IIE is aware that Snobs is in desperate need for capacity, and that it can demand a higher price per job from Snobs. At what price would it become attractive for IIE to abandon its current reproduction jobs (which require both the PP and the MP processes) and dedicate all its capacity to cater to the demand from Snobs?

Related Discussions:- Throughput Accounting

Calculate the variable cost, Workmen shoes accumulated the following produc...

Workmen shoes accumulated the following production and cost data for the past 5 months. i)  Using the high/low method calculate the variable cost per unit and the fixed cos

Cost accounting, raw an organization chart of any actual or hypothetical ma...

raw an organization chart of any actual or hypothetical manufacturing organization to show the position of management/cost accounting department within an organization and discuss

Cost bookkeeping, what are the accounting entries for interlocking and int...

what are the accounting entries for interlocking and integrated systems of cost accounting?

Determine the ethicality of the events within the case, Write a 1,200- to 1...

Write a 1,200- to 1,500-word paper explaining the legal aspects, financial standards involved, and ethicality of the Excello Telecommunications case. Your paper should include the

Joint cost allocation, advantage of physical measure

advantage of physical measure

Accounting 561, Your organization (City Rehab) has been approached by an MC...

Your organization (City Rehab) has been approached by an MCO looking for an exclusive arrangement for the rehabilitation of its hip replacement patients. The MCO is aggressively po

Features of jit, What are the major features of JIT?

What are the major features of JIT?

Normality and that seasonality is not a factor, One item a computer store s...

One item a computer store sells is supplied by a vendor who handles only that item. Demand for that item recently changed, and the store manager must determine when to replenish it

Compute the equivalent units of production for materials, Clopack Company m...

Clopack Company manufactures one product that goes through one processing department called Mixing. All raw materials are introduced at the start of work in the Mixing Department.

306, creating a decision treeplan

creating a decision treeplan.

Write Your Message!

Captcha
Order Assignment

Featured Services

Order Now

Popular Subjects

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +91-977-207-8620

Phone: +91-977-207-8620

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd