Identifying and managing unused capacity.
|
2010 |
2011 |
||
|
Number of jobs billed |
60 |
70 |
|
|
Selling price per job |
$50,000 |
$48,000 |
|
|
Software implementation labor hours |
30,000 |
32,000 |
|
|
Cost per software implementation labor hour |
$60 |
$63 |
|
|
Software implementation support capacity (number of jobs it can do) |
90 |
90 |
|
|
Total cost of software implementation support |
$360,000 |
$369,000 |
|
|
Software implementation support capacity cost per job (row 6 ÷ row 5) |
$4,000 |
$4,100 |
1. Calculate the amount and cost of unused software implementation support capacity at the beginning of 2011, based on the number of jobs actually done in 2011.
2. Suppose Westlake can add or reduce its software implementation support capacity in increments of 15 units. What is the maximum amount of costs that Westlake could save in 2011 by downsizing software implementation support capacity?
3. Westlake, in fact, does not eliminate any of its unused software implementation support capacity. Why might Westlake not downsize?