# On the basis of quantitative considerations alone

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19-25 gaining manufacturing expertise that could lead to further cost reductions in the future; b. enhanced reputation and increased customer goodwill which could lead to higher future revenues through greater unit sales and higher sales prices; and c. higher employee morale as a result of higher quality. 19-31 (25–30 min.) Waiting times, manufacturing cycle times.1a. Average waiting time for an order of Z39 ()()()2Annual average numberManufacturing timeof orders of Z39per order of Z39Annual machineAnnual average numberManufacturing time2 capacityof orders of Z39per order of Z39x××2[50(80) ](506,400)320,000160 hours per order2[5,000(5080)]2(5,0004,000)(21,000)××====××××1b. Average manufacturingcycle time per order for Z39= Average orderwaiting time+ Order manufacturingtime for Z39= 160 hours + 80 hours = 240 hours per order 2a. Average waiting time for Z39 and Y28 22Annual average Manufacturing Annual average Manufacturing number of time per order number oftime per orderorders of Z39of Z39orders of Y28of Y28⎡⎡⎢⎢×××⎢⎢AnnualAnnual averageManufacturingAnnual averageManufacturing2machinenumber oftime per ordernumber oftime per orcapacityorders of Z39of Z39orders of Y28⎦⎦×××derof Y28⎦⎦22[50(80) ][25(20) ][(506,400)(25400)](320,00010,000)2[5,000(5080)(2520)]2[5,0004,000500]2×+××+×+===×××××500330,000330 hours1,000==On the basis of quantitative considerations alone, Harvest should use the new material. Relevant benefits of \$500,000 exceed the relevant costs of \$300,000 by \$200,000. 2. Other nonfinancial and qualitative factors that Harvest should consider in making a decision include the effects of quality improvement on a. gaining manufacturing expertise that could lead to further cost reductions in the future; b. enhanced reputation and increased customer goodwill which could lead to higher future revenues through greater unit sales and higher sales prices; and c. higher employee morale as a result of higher quality. 19-31 (25–30 min.) Waiting times, manufacturing cycle times.1a. Average waiting time for an order of Z39 ()()()2Annual average numberManufacturing timeof orders of Z39per order of Z39Annual machineAnnual average numberManufacturing time2 capacityof orders of Z39per order of Z39x××2[50(80) ](506,400)320,000160 hours per order2[5,000(5080)]2(5,0004,000)(21,000)××====××××1b. Average manufacturingcycle time per order for Z39= Average orderwaiting time+ Order manufacturingtime for Z39= 160 hours + 80 hours = 240 hours per order 2a. Average waiting time for Z39 and Y28 22Annual average Manufacturing Annual average Manufacturing number of time per order number oftime per orderorders of Z39of Z39orders of Y28of Y28⎡⎡⎢⎢×××⎢⎢AnnualAnnual averageManufacturingAnnual averageManufacturing2machinenumber oftime per ordernumber oftime per orcapacityorders of Z39of Z39orders of Y28⎦⎦×××derof Y28⎦⎦22[50(80) ][25(20) ][(506,400)(25400)](320,00010,000)2[5,000(5080)(2520)]2[5,0004,000500]2×+××+×+===×××××500330,000330 hours1,000==
19-26 2b. Average manufacturingcycle time for Z39= Average orderwaiting time+ Order manufacturingtime for Z39= 330 hours + 80 hours = 410 hours Average manufacturingcycle time for Y28= Average orderwaiting time+ Order manufacturingtime for Y28= 330 hours + 20 hours = 350 hours 19-32(60 min.) Waiting times, relevant revenues, and relevant costs (continuation of 19-31). Selling price per order of Y28, which has an average manufacturing lead time of more than 320 hours \$ 6,000 Variable cost per order 5,000Additional contribution per order of Y28 \$ 1,000 Multiply by expected number of orders × 25Increase in expected contribution from Y28 \$25,000Expected loss in revenues and increase in costs from introducing Y28: Expected Loss in Expected Increase in Expected Loss in Revenues from Carrying Costs from Revenues Plus Increasing Average Increasing Average Expected Increases Manufacturing Cycle Manufacturing Cycle in Carrying Costs of Product Times for All Products Times for All Products Introducing Y28 (1) (2) (3) (4) = (2) + (3) Z39 \$25,000.00a\$6,375.00b\$31,375.00 Y28 2,187.50c2,187.50Total \$25,000.00\$8,562.50\$33,562.50a50 orders × (\$27,000 – \$26,500) b(410 hours – 240 hours) × \$0.75 × 50 orders c(350 hours – 0) × \$0.25 × 25 Increase in expected contribution from Y28 of \$25,000 is less than increase in expected costs of \$33,562.50 by \$8,562.50. Therefore, Seawall should not introduce Y28.
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