Annotated+Exam+2

Annotated+Exam+2 - SM122 Exam 2 Version A - Page 1 Start...

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SM122 – Exam 2 – Version A - Page 1 Start Questions Dealing with Hafsah’s Home Remedies (HHR) HHR produces a line of products intended to improve health without traditional physician intervention. One such product is the mood ring. The mood ring is produced using a three stage production process. Certain details of the process are provided in the table below. All costs are per unit processed and all yields are in percentages. Stage Incoming Cost Material Cost Labor Cost Yield Outgoing Cost 1 - $1.20 $2.20 95 3.58 2 3.58 $14.30 $1.20 90 21.2 3 21.2 $.10 $4.40 95 27.05 15.6 7.8 .81225 1. The process as described has an overall yield rate of: 1. More than 90% 2. Between 87% and 90% 3. Between 84% and 87% 4. Between 81% and 84% The product of the stage yields 5. Less than 81% 2. The process cost per good unit is: 1. More than $28 per good unit 2. Between $27 and $28 per good unit Outgoing cost at Stage 3 3. Between $26 and $27 per good unit 4. Between $25 and $26 per good unit 5. Less than $25 per good unit 3. Scrap cost per good unit is: 1. More than $3.50 per unit The difference between the Outgoing Cost at Stage 3 and the Cost per unit if the yield rate were 100% at each stage, simply the sum of the material and labor cost or 23.4. 27.05 – 23.4 = $3.65 per unit 2. Between $3.25 and $3.50 per unit 3. Between $3.00 and $3.25 per unit 4. Between $2.75 and $3.00 per unit 5. Less than $2.75 per unit 4. A manager proposes to raise the yield rate at stage 2 to 95% by putting more skilled workers on the task. In order to achieve that objective labor cost per unit would need to increase from $1.20 to $2.80. Considering only scrap costs should the manager’s proposal be accepted or rejected.
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SM122 – Exam 2 – Version A - Page 2 1. The proposal should be rejected since scrap cost per unit will increase The new outgoing cost at Stage 2 would be (3.58 + 14.3 + 2.8)/.95 = 21.77 which is greater than the cost without making the adjustment – therefore the proposal will result in higher scrap costs – remember that scrap cost includes wasted materials and labor. 2. The proposal should be rejected since scrap cost per unit will decrease 3. The proposal should be accepted since scrap cost per unit will increase 4. The proposal should be accepted since scrap cost per unit will decrease End Questions Dealing with Hafsah’s Home Remedies (HHR) Start Questions Dealing with Lucas’s Lasting Toasters (LLT) LLT is a manufacturer of specialized products for home use. Its number one seller is a toaster that has the ability to toast one side only – especially useful for bagels. LLT purchases all components from outside vendors and assembles its products in a single facility located in Newark. The process used to assemble the one-side only toaster is four stages and is described below. All times are per unit and in seconds. Stage
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Annotated+Exam+2 - SM122 Exam 2 Version A - Page 1 Start...

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