Reference no: EM132478984
ConnectX Engineering are currently using a manufacturing costing system with one direct cost category and three indirect cost categories:
- Direct materials (direct cost).
- Setup, production order, and materials-handling costs that vary with the number of batches (indirect cost).
- Manufacturing operations costs that vary with machine-hours (indirect cost).
- Costs of engineering changes that vary with the number of engineering changes made (indirect cost).
In response to competitive pressures at the end of 2019, ConnectX used value-engineering techniques to reduce manufacturing costs. Actual information for 2018 and 2019 is:
2018 2019
Setup, production order and
material-handling cost per batch $6000 $5500
Total manufacturing-operations
cost per machine-hour $50 $45
Cost per engineering change $4000 $4,440
Question 1: The management of ConnectX wants to evaluate whether value engineering has succeeded in reducing the target manufacturing cost per unit of one of its flow controllers by 10%. Actual results for 2018 and 2019 for the flow controller are?
2018 2019
Flow controllers produced 2900 3300
Direct material cost per unit 1700 1600
Total number of batches required 110 120
Total number of machine-hours required 7200 7100
Number of engineering changes made 7 8
Required
Question a. Calculate the manufacturing cost( total per unit) for both year.
Question b. Did the company achieve the target manufacturing cot per unit in 2019? Explain