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What are the long-run expected savings

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Question - Racer X Corporation manufactures two models of motorized go-carts, a standard and a deluxe model. The following activity and overhead cost information has been compiled:

Product

Number of Setups

Number of Components

Number of Direct Labor Hours

Standard

15

10

800

Deluxe

35

15

400

Overhead costs -

Set-up activity $50,000

Inspection Activity $40,000

Racer X hopes to reduce the overhead costs associated with the setups in the long-run:

i) By reducing the cost of performing each set up by 10% and

ii) By reducing the setups for standard from 15 to 10 and for deluxe from 35 to 30.

Required - What are the long-run expected savings at the setup activity pool from these process improvements?

Reference no: EM132483117

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