Question

Plastic Chairs manufactures plastic lawn chairs using a combination of new and recycled plastic. Varying amounts of each type of plastic can be used to produce a batch of 100 chairs. The table below lists the various combinations of recycled and new plastic required to produce one batch of 100 chairs.


New plastic costs $ 16 per pound and recycled plastic costs $ 10 per pound. The manager of the chair manufacturing department receives a bonus based on minimizing the cost per batch of 100 chairs.

Required:
a. What combination of new and recycled plastic will the manager of the chair manufacturing department choose?
b. Overhead (including plant administration, utilities, property taxes, and insurance) is allocated to the chair manufacturing department based on the number of pounds of recycled plastic used in each batch. For each pound of recycled plastic used, the chair manufacturing department is charged $ 30 of plant overhead. What combination of new and recycled plastic will the manager of the chair manufacturing department select if the manager’s bonus is based on minimizing the total cost per batch, which includes new and recycled plastic and plant overhead?
c. Why are your answers to ( a ) and ( b ) either the same or different?
d. Should the plastic chairs manufacturing manager’s bonus be based on minimizing only the plastic costs or should it also be based on minimizing plastic costs plus allocated plantoverhead?


$1.99
Sales0
Views66
Comments0
  • CreatedDecember 15, 2014
  • Files Included
Post your question
5000