Question

In: Operations Management

The H & S Motor Company produces small motors at a production cost of $30 per...

The H & S Motor Company produces small motors at a production cost of $30 per unit. Defective motors can be reworked at a cost of $12 each. The company produces 100 motors per day and averages 88 percent good quality motors. Based on past experience, 50% of the defective motors can be reworked prior to shipping to customers. These are also considered good motors. A good motor can be sold for $100 while a defective motor can be scrapped and sold for $16. Income consists of both the revenue from the sold motors and the scrapped motors.

1. Using the number of good motors shipped as the measure of output and the cost of production as the input, what is the company's productivity if no defective motors are reworked?

2. Suppose that the company now uses the total income as the output measure and the cost of production as the input. What is the company's productivity if no defective motors are reworked?

3. Now suppose the company reworks the defective motors that can be reworked. Using the number of good motors shipped as the measure of output and the cost of production as the input, what is the company's productivity now?

4. What is the percent change in productivity comparing the productivity in #3 to the productivity in #1?

Solutions

Expert Solution

Output:

Number of good motors shipped when no rework is done= Good motor% * Daily output = 88%*100 = 88

Input:

Cost of production = Cost per motor*Number of Motors produced = 100*30 = 3000

Productivity = Output/Input

Productivity = 88/3000 = 0.02933 motors/dollar in cost

Good motors = 88

Selling price = $100

Bad motor = 12

Scrap Value = $16

Output:

Net Income = Revenue + Income from scrapped motors

Net Income = Good motors shipped*selling price + Bad motor*Scrap value

Net income = 88*100 + 12*16 = 8800 + 192 = 8992

Input:

Cost of production = 100*30 = 3000

Productivity = Output/Input

Productivity =8992/3000= 2.9973

Good motors without rework = 88

Good motors with rework = (100-88)*50% [50% of bad motors created in first time production]

Good motors with rework = 12*50% = 6

Total good motors shipped = Good motors without rework + Good motors with rework = 88+6 = 94

Rework cost = $12 per motor

Output:

Total good motors shipped = 88+6 = 94

Input:

Total Cost of production = Cost of first time production + Cost of rework = 100*30 + 6*12 = 3000 + 72 = 3072

Productivity = Output/Input

Productivity =94/3072= 0.030598 motors /dollar in cost

% change in productivity = *100

% change in productivity = (0.030598 - 0.02933)/0.02933 *100

% change in productivity = 0.043232*100

% change in productivity = 4.3232%

keosha answered 7 months ago

Next > < Previous

Related Solutions

Petula Corporation’s small motor division manufactures small electrical motors that are used in the manufacture of...

Petula Corporation’s small motor division manufactures small electrical motors that are used in the manufacture of electric appliances. The Appliance division manufactures appliances and uses one small electrical motor in each appliance. These motors are currently purchased from another company at a cost of $28. The appliance division requires 15,000 motors annually. The small motor division sells its motors to the outside market at a price of $32 each. The cost to manufacture one motor is as follows: Variable cost...

Chen Company's Small Motor Division manufactures a number of small motors used in household and office...

Chen Company's Small Motor Division manufactures a number of small motors used in household and office appliances. The Household Division of Chen then assembles and packages such items as blenders and juicers. Both divisions are free to buy and sell any of their components internally or externally. The following costs relate to small motor LN233 on a per unit basis. Fixed cost per unit $4.65 Variable cost per unit $11.20 Selling price per unit $35.10 a.) Assuming that the Small...

Allied Company's Small Motor Division manufactures a number of small motors used in household and office...

Allied Company's Small Motor Division manufactures a number of small motors used in household and office appliances. The Household Division of Allied then assembles and packages such items as blenders and juicers. Both divisions are free to buy and sell any of their components internally or externally. The following costs relate to small motor LN233 on a per unit basis. Fixed cost per unit $ 5 Variable cost per unit $11 Selling price per unit $35 Instructions (a) Assuming that...

Jackson Company produces plastic that is used for injection-molding applications such as gears for small motors....

Jackson Company produces plastic that is used for injection-molding applications such as gears for small motors. In 2016, the first year of operations, Jackson produced 4,100 tons of plastic and sold 3,075 tons. In 2017, the production and sales results were exactly reversed. In each year, the selling price per ton was $ 2,000, variable manufacturing costs were 16% of the sales price of units produced, variable selling expenses were 10% of the selling price of units sold, fixed manufacturing...

Jackson Company produces plastic that is used for injection-molding applications such as gears for small motors....

Jackson Company produces plastic that is used for injection-molding applications such as gears for small motors. In 2019, the first year of operations, Jackson produced 5,700 tons of plastic and sold 4,275 tons. In 2020, the production and sales results were exactly reversed. In each year, the selling price per ton was $2,000, variable manufacturing costs were 18% of the sales price of units produced, variable selling expenses were 9% of the selling price of units sold, fixed manufacturing costs...

1. A company produces electric motors for use in home appliances. One of the company’s production...

1. A company produces electric motors for use in home appliances. One of the company’s production managers is interested in examining the relationship between the dollars spent per month in inspecting finished motor products (X) and the number of motors produced during that month that were returned by dissatisfied customers (Y). He has collected the data in the file P11_32.xlsx to explore this relationship for the past 36 months. a. Estimate a simple linear regression equation using the given data....

Harper Motors sells 30 cars per month at an average price of $24,200. The carrying cost...

Harper Motors sells 30 cars per month at an average price of $24,200. The carrying cost per car is $140 and the fixed order cost is $685. How many orders should the company place per year? Multiple Choice 6.07 orders 59.35 orders 9.10 orders 30.00 orders 17.13 orders

A company produces a product which has a standard variable production cost of $8 per unit...

A company produces a product which has a standard variable production cost of $8 per unit made up as follows: $ Per Unit Direct material $4.60 (2kg X $2.30 per kg) Direct labour $2.10 (0.7 hours x $3.00 per hour) Variable overhead $1.3 Fixed manufacturing costs are treated as period costs. The following information is available for the period just ended, Variable manufacturing cost of sales (at standard cost) $263,520 Opening stock of finished goods (at standard cost) $120,800 Closing stock of finished...

Morelli Electric Motor Corporation manufactures electric motors for commercial use. The company produces three models, designated...

Morelli Electric Motor Corporation manufactures electric motors for commercial use. The company produces three models, designated as standard, deluxe, and heavy-duty. The company uses a job-order cost-accounting system with manufacturing overhead applied on the basis of direct-labor hours. The system has been in place with little change for 25 years. Product costs and annual sales data are as follows: Standard Model Deluxe Model Heavy-Duty Model Annual sales (units) 19,000 1,500 9,400 Product costs: Raw material $ 18 $ 33...

Vernon Corporation is a manufacturing company that makes small electric motors it sells for $52 per...

Vernon Corporation is a manufacturing company that makes small electric motors it sells for $52 per unit. The variable costs of production are $28 per motor, and annual fixed costs of production are $576,000. Required How many units of product must Vernon make and sell to break even? How many units of product must Vernon make and sell to earn a $72,000 profit? The marketing manager believes that sales would increase dramatically if the price were reduced to $46 per...

Subjects