Ellington Company manufactures a line of motorbikes and dirt bikes under the trade name CrossCountry. The company has been in business for almost 20 years and has maintained a profitable share of the recreational vehicle märket due to its reputation for high-quality products. In addition, Ellington's engineering department has kept the company in the forefront by incorporating the latest technology in the Cross Country bikes. Most subassembly work for the bikes is subcontracted to reliable vendors. However, the final assembly and inspection of all products is performed at Ellington's plant

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

9

Part 1 (Algo)
has proved to be a high-quality and reliable vendor. The terms of MACQ's proposal are negotiable, and before beginning
discussions with them, Joyce has decided to conduct some relevant financial analysis
Required:
1. Ellington Company has an immediate requirement for a total of 1,600 units of the braking system. Determine the company's future
direct labor costs to produce the required braking system units if it manufactures the units in-house
2. A consultant has advised Joyce that the learning rate for this application might be closer to 75% What is the effect on projected
costs of using a 75% learning rate as opposed to an 80% learning rate? (Do not round intermediate calculations.)
1.
2
Answer is complete but not entirely correct.
Future direct labor cost
The firm will have i
savings
of
$
$
3,876
432 X
Return to
Transcribed Image Text:Part 1 (Algo) has proved to be a high-quality and reliable vendor. The terms of MACQ's proposal are negotiable, and before beginning discussions with them, Joyce has decided to conduct some relevant financial analysis Required: 1. Ellington Company has an immediate requirement for a total of 1,600 units of the braking system. Determine the company's future direct labor costs to produce the required braking system units if it manufactures the units in-house 2. A consultant has advised Joyce that the learning rate for this application might be closer to 75% What is the effect on projected costs of using a 75% learning rate as opposed to an 80% learning rate? (Do not round intermediate calculations.) 1. 2 Answer is complete but not entirely correct. Future direct labor cost The firm will have i savings of $ $ 3,876 432 X Return to
Problem 8-53 (Algo) Learning Curves [LO 8-1,8-5]
[The following information applies to the questions displayed below]
Ellington Company manufactures a line of motorbikes and dirt bikes under the trade name CrossCountry. The company
has been in business for almost 20 years and has maintained a profitable share of the recreational vehicle market due to
its reputation for high-quality products. In addition, Ellington's engineering department has kept the company in the
forefront by incorporating the latest technology in the Cross Country bikes. Most subassembly work for the bikes is
subcontracted to reliable vendors. However, the final assembly and inspection of all products is performed at Ellington's
plant
Ellington recently developed a new braking system for the CrossCountry Model-500 dirt bike. Because of the company's
current availability of production capacity, Jim Walsh, production manager, recommended that the first lot of the new
braking system be manufactured in-house rather than by subcontractors. This 220-unit production run has now been
completed. The cumulative average labor hours per unit for the braking system was 220 hours. Ellington's experience
with similar products indicates that a learning curve of 80% is applicable and that the learning factor can be expected to
extend only through the fourth production run (220 per batch) for a total of 880 units.
Ellington's direct labor cost is $33 per direct labor hour. Its management must decide whether to continue producing the
braking system in its own plant or to subcontract this work. Joyce Lane, Ellington's purchasing agent, has received a
proposal from MACQ, a company specializing in component assembly MACQ has done work in the past for Ellington and
has proved to be a high-quality and reliable vendor. The terms of MACQ's proposal are negotiable, and before beginning
Dra
D
Return
Transcribed Image Text:Problem 8-53 (Algo) Learning Curves [LO 8-1,8-5] [The following information applies to the questions displayed below] Ellington Company manufactures a line of motorbikes and dirt bikes under the trade name CrossCountry. The company has been in business for almost 20 years and has maintained a profitable share of the recreational vehicle market due to its reputation for high-quality products. In addition, Ellington's engineering department has kept the company in the forefront by incorporating the latest technology in the Cross Country bikes. Most subassembly work for the bikes is subcontracted to reliable vendors. However, the final assembly and inspection of all products is performed at Ellington's plant Ellington recently developed a new braking system for the CrossCountry Model-500 dirt bike. Because of the company's current availability of production capacity, Jim Walsh, production manager, recommended that the first lot of the new braking system be manufactured in-house rather than by subcontractors. This 220-unit production run has now been completed. The cumulative average labor hours per unit for the braking system was 220 hours. Ellington's experience with similar products indicates that a learning curve of 80% is applicable and that the learning factor can be expected to extend only through the fourth production run (220 per batch) for a total of 880 units. Ellington's direct labor cost is $33 per direct labor hour. Its management must decide whether to continue producing the braking system in its own plant or to subcontract this work. Joyce Lane, Ellington's purchasing agent, has received a proposal from MACQ, a company specializing in component assembly MACQ has done work in the past for Ellington and has proved to be a high-quality and reliable vendor. The terms of MACQ's proposal are negotiable, and before beginning Dra D Return
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps with 6 images

Blurred answer
Knowledge Booster
Compensation and Benefits
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education