Little dog unlimited makes small motorcycles the

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Cornerstones of Cost Management
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Chapter 17 / Exercise 17.19
Cornerstones of Cost Management
Hansen/Mowen
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79.Little Dog Unlimited makes small motorcycles. The monthly demand ranges from 80 to 100 motorcycles. The average demand is 92 motorcycles. The plant operates 300 hours a month. Each cycle takes approximately 1.5 hours.If the company adds a new line of scooters, initial demand will be 20 per month. Each scooter will take 1 hour to make. To offset approaching production capacity, expanding the assembly line is possible. This will decrease manufacturing time for all products by 20%. However, this will increase the costs of cycles from $400 to $500 and scooters from $200 to $240. The change will also cause increases in prices from $700 to $750 for cycles and from $450 to $500 for scooters.Required:a.What is the average waiting time for cycles if they are the only item manufactured?b.What are the average waiting times if both cycles and scooters are produced and the assembly line is not enlarged?c.What are the average waiting times if both cycles and scooters are produced and the assembly line is enlarged?Chapter 19 Page 19
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Cornerstones of Cost Management
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Chapter 17 / Exercise 17.19
Cornerstones of Cost Management
Hansen/Mowen
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79.(continued)d.What is the expected monthly margin without scooters if the company sells all 92 cycles it manufactures?e.What are the expected monthly contribution margins if scooters are made with the current assembly line andwith the new assembly line? Assume average sales and that sales equal production. f.What action do you recommend?Answer:
Chapter 19 Page 20
80.Brix, Inc., prepares frozen food for fast-food restaurants. It has two workstations, cooking and assembly. The cooking station is limited by the cooking time of the food. Assembly is limited by the speed of the workers. Assembly normally waits on food from cooking. Because the demand has increased in recent months to 2,800 dozen units, management is considering adding another cooking station or else having the cooks start to work earlier. The monthly cost of operating the cooking station one more hour each day is $2,400. The cost of adding another cooking station would add an average of $10 per hour. The current operating hours total eight hours a day, 22 days a month. The contribution margin of the finished products is currently $8 per dozen. Inventory

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