Determine average unit cost of eight units using

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Reference no: EM133381303

Case Study: Walker Limited wants to incorporate the effects of learning into the cost of producing a component used in the laser printers it sells to commercial print shops. The standard cost of direct materials for the component is $40 per unit. Budgeted setup costs are $100 per setup. The standard rate for direct labour is $20 per hour, and the standard variable overhead rate is 150% of direct labour costs.

Production of the component is a repetitive process that requires experience to reach maximum productivity levels. Standards reflect a 70% learning rate. The initial component requires 10 hours to produce.

Question:

1. Determine the average unit cost of eight units using the cumulative average time approach. (Do not round intermediate calculations.)

2. If the component can be purchased from an external supplier for $310 per unit, at what level of production would Walker Limited be indifferent between producing the component internally and buying it from the supplier?

Reference no: EM133381303

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