Morrison Manufacturing produces casings for sewing machines: large and small. To produce the different casings, equipment must be set up. The setup cost per production run is $18,000 for either casing. The cost of carrying small casings in inventory is $6 per year; the cost of large casings $18 per unit per year. To satisfy demand, the company produces 2,400,000 small casings and 800,000 large casings. Required: Compute the number of small casings that should be produced per setup to minimize total setup and carrying costs. Compute the setup, carrying, and total costs associated with the economic order quantity for the small casings.
Morrison Manufacturing produces casings for sewing machines: large and small. To produce the different casings, equipment must be set up. The setup cost per production run is $18,000 for either casing. The cost of carrying small casings in inventory is $6 per year; the cost of large casings $18 per unit per year. To satisfy demand, the company produces 2,400,000 small casings and 800,000 large casings. Required: Compute the number of small casings that should be produced per setup to minimize total setup and carrying costs. Compute the setup, carrying, and total costs associated with the economic order quantity for the small casings.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter13: The Balanced Scorecard: Strategic-based Control
Section: Chapter Questions
Problem 8E: Hatch Manufacturing produces multiple machine parts. The theoretical cycle time for one of its...
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Morrison Manufacturing produces casings for sewing machines: large and small. To produce the different casings, equipment must be set up. The setup cost per production run is $18,000 for either casing. The cost of carrying small casings in inventory is $6 per year; the cost of large casings $18 per unit per year. To satisfy demand, the company produces 2,400,000 small casings and 800,000 large casings.
Required:
- Compute the number of small casings that should be produced per setup to minimize total setup and carrying costs.
- Compute the setup, carrying, and total costs associated with the economic order quantity for the small casings.
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