Reference no: EM13575528

Fiberform Industries produces a line of motorboats. The assembly department programs computerized equiptment to shape and bend the metal railings for each boat. This equipment is capable of producing 40 railings per hour. The department typically produces onlu 30 railings per hour. The plant operates two (8 hour) shifts, 6 days a week. The shape and bend of the railings are critical, and the firm currently discards 9,600 completed railings a year because of poor shape and bend. The plant is closed for 12 vacation days and 10 holidays per year. The equipment is also shut down for one day every 2 months for regular maintenance. The assembly department's average production of good railings for the past 5 years is 130,000 a year. The department is expected to produce 120,000 good boat railings this year. However, the actual production was 105,000 railings. For this problem, assume the 365th day is Sunday. Further assume any difference between actual sales and production under current conditions is idle marketable capacity

REQUIRED:

a. Assume that the total equipment-related cost for the assemble department was $2,400,000. Determine the colume and capacity cost for each of the following tradional measures: (i) theoretical (ii) normal (iii)budget; and (iv) actual.

b. Using the CAM-I model, determine the amount of equipment time that falls into each of the following categories: (i) rated (ii) idle (iii) non-productive (iv) productive. As part of your solution attempt to determine what types of idle and non-productive capacity exists. (Note: you may have to back inot one type of idle capacity)

c. Assume that the equipment used in the plant rents for $1,200,000 a year. In addition, there is a daily cost of $1,000 whether or not the plant operates. An additional $835,000 of cost is incurred on the days the plant is operating or undergoing maintenance. Estimate the cost that should be assigned for : (i) idle (ii) non-productive (iii) productive capacity.