We have been producing product A for several years and look forward to several more years of sales at 500,000 units per year or 2,000 units per day. The present method requires a standard time of 2.0 mins per unit or 30 pcs per hour. At this rate, it takes 33.33 hrs to make 1,000 units. All production will run on the day shift. Present Method and Costs - with a labor rate of $10.00/hr, the labor cost will be $333.30 to produce 1,000 units. The cost of 500,000 units per year would be $166,650.00 in direct labor. New Method and Cost- we have a reduction idea. If we buy this new machine attachment for $1000, the new time standard would be lowered to 1.5 minutes per unit. Will this investment be good for us?

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Explain the computation needed.
We have been producing product A for several years and look forward to several more years of sales at 500,000 units per year or
2,000 units per day. The present method requires a standard time of 2.0 mins per unit or 30 pcs per hour. At this rate, it takes 33.33 hrs
to make 1,000 units. All production will run on the day shift.
Present Method and Costs- with a labor rate of $10.00/hr, the labor cost will be $333.30 to produce 1,000 units.
The cost of 500,000 units per year would be $166,650.00 in direct labor.
New Method and Cost- we have a reduction idea. If we buy this new machine attachment for $1000, the new time standard would be lowered to
1.5 minutes per unit. Will this investment be good for us?
Transcribed Image Text:Explain the computation needed. We have been producing product A for several years and look forward to several more years of sales at 500,000 units per year or 2,000 units per day. The present method requires a standard time of 2.0 mins per unit or 30 pcs per hour. At this rate, it takes 33.33 hrs to make 1,000 units. All production will run on the day shift. Present Method and Costs- with a labor rate of $10.00/hr, the labor cost will be $333.30 to produce 1,000 units. The cost of 500,000 units per year would be $166,650.00 in direct labor. New Method and Cost- we have a reduction idea. If we buy this new machine attachment for $1000, the new time standard would be lowered to 1.5 minutes per unit. Will this investment be good for us?
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