Identifying and managing unused capacity.
1. Calculate the amount and cost of (a) unused manufacturing capacity and (b) unused selling and customer service capacity at the beginning of 2011 based on actual production and actual number of customers served in 2011.
2. Suppose Stanmore can add or reduce its manufacturing capacity in increments of 30 units. What is the maximum amount of costs that Stanmore could save in 2011 by downsizing manufacturing capacity?
3. Stanmore, in fact, does not eliminate any of its unused manufacturing capacity. Why might Stanmore not downsize?
|
2010 |
2011 |
||
|
Units of D4H produced and sold |
200 |
210 |
|
|
Selling price |
$40,000 |
$42,000 |
|
|
Direct materials (kilograms) |
300,000 |
310,000 |
|
|
Direct material cost per kilogram |
$8 |
$8.50 |
|
|
Manufacturing capacity in units of D4H |
250 |
250 |
|
|
Total conversion costs |
$2,000,000 |
$2,025,000 |
|
|
Conversion cost per unit of capacity (row 6 ÷ row 5) |
$8,000 |
$8,100 |
|
|
Selling and customer service capacity |
100 customers |
95 customers |
|
|
Total selling and customer service costs |
$1,000,000 |
$940,500 |
|
|
Selling and customer service capacity cost per customer(row 9 ÷ row 8) |
$10,000 |
$9,900 |