In: Accounting
Case - PCB Electronics
PCB Electronics is a contract manufacturer of printed circuit board assemblies that specializes in manufacturing and test engineering support of complex printed circuit boards for companies in the defense and medical instruments industries. The assembly process begins with raw printed circuit boards, into which preprogrammed robotic machines insert various integrated circuits and other components, and then these parts are soldered onto the board. The board is then tested before shipment to the customer.
Four separate assembly lines, each with roughly the same type of equipment, are used to assemble the circuit boards. Before running a particular board assembly, the insertion equipment must be loaded with the correct components, and the equipment programmed and tested before production begins. Setup time varies between 3 to 6 hours depending on the complexity of the board being assembled. Setup labor costs PCB $40 per hour, and technicians assembling and testing the completed boards cost $28 per hour. Not every assembly line can manufacture every type of board. Some lines have older insertion and testing equipment inappropriate for more complex assemblies. The assignment of boards to assembly lines depends on the number and complexity of the component insertions, the type of soldering to be applied, and the testing required.
Each assembly line has an hourly cost consisting of the accounting depreciation on the equipment (straight line) and occupancy costs (factory depreciation, taxes, insurance, and utilities). Occupancy costs are fixed with respect to volume changes. Direct labor to set up and test the line as well as the direct labor to manufacture the complete board assemblies and the testing of each board is tracked separately to each batch of boards. The following table summarizes the costs of operating each line and the annual number of hours each line is expected to run assembling boards (excluding setup and testing time).
Line I |
Line II |
Line III |
Line IV |
|
Equipment depreciation |
$ 840,000 |
$1,300,000 |
$480,000 |
$ 950,000 |
Occupancy costs |
213,000 |
261,000 |
189,000 |
237,000 |
Total annual line costs |
$1,053,000 |
$1,561,000 |
$669,000 |
$1,187,000 |
Expected hours of operations |
1,800 |
2,200 |
1,600 |
2,000 |
The equipment depreciation cost varies widely across the two lines because some of the lines (especially Line III) have older machines, some of which are fully depreciated.
Required:
Line I: 1,053,000/1,800=$585 Line II: 1,561,000/2,200=$709.55 Line III: 669,000/1,600=$418.13 Line IIII: 1,187,000/2,000=$593.50
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C. APC's out of pocket order consists of set up labor ($160) plus assembly labor ($3,192) or ($3,352).