5) Assume that the decision to make pool shades and trellises are considered to be long-term...

 

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5) Assume that the decision to make pool shades and trellises are considered to be long-term decisions and that Chandler would make these products one at a time as time is available so as not to delay any of the custom orders. As such, the resource usage approach would be a more appropriate approach to evaluating the decision to make the products. 5a) Compute the rates to be used for the resource usage view (show your work) Design/Drafting Engineering Fabrication Powder coating Scheduling General factory 5b) Compute the incremental profit of making and selling the full demand of pool shades. 5c) Compute the average cost of making one pool shade. 5d) Compute the incremental profit of making and selling the full demand oftrellises 5e) Compute the average cost of making one trellis. Resource usage approach Product Line Unit sales price Incremental revenue Material Design/Drafting Engineering Fabrication Powder coating b. Pool Shades Only d. Trellises Only Scheduling General factory Total cost Incremental Profit C. 5f) Given the assumptions above (long-term, small scale), would Chandler's management choose to make either or both of the products? Explain. Exhibit 1. Existing Capacity Available and Used and Capacity Costs (Annual) Resource Practical Capacity Cost Driver Purchased Cost of Capacity Used Capacity Design/Drafting 20,000 Design hours $500,000 19,500 Engineering 15,000 Engineering hours $750,000 14,750 Fabrication 40,000 Number of parts $30,000 39,000 Powder coating 400,000 Square feet $1,800,000 210,000 Scheduling/setup 750 Job setups $756,000 640 General factory 80,000 Machine hours $2,400,000 64,000 Exhibit 2. Resource Needs for Potential New Products Resource (Cost Level) Cost Driver Pool Shade Requirements Trellis Requirements Design/Drafting (product) Design hours 30 20 Engineering (product) Engineering hours 4 2 Fabrication (unit) Number of parts 40 22 Powder coating (unit) Square feet 1,600 170 Scheduling/setup (unit) Job setups 1 1 General factory (unit) Machine hours 80 10 Selling price/unit Pool Shade Trellis $42,500 Material cost/unit $18,750 Desired Profit on Sales 0.30 $4,300 Demand Pool shades 120 $700 Demand Trellises 60 Exhibit 3. Purchase Price of Additional Capacity Resource Capacity of next step Cost Driver Cost of Next Step Design/Drafting 2,000 Design hours $50,000 Engineering 2,000 Engineering hours $110,000 Fabrication 3,000 Parts $3,150 Powder coating 20,000 Square feet $100,000 Scheduling/setup 5,000 Job setups $4,000 General factory 2,000 Machine hours $36,000 5) Assume that the decision to make pool shades and trellises are considered to be long-term decisions and that Chandler would make these products one at a time as time is available so as not to delay any of the custom orders. As such, the resource usage approach would be a more appropriate approach to evaluating the decision to make the products. 5a) Compute the rates to be used for the resource usage view (show your work) Design/Drafting Engineering Fabrication Powder coating Scheduling General factory 5b) Compute the incremental profit of making and selling the full demand of pool shades. 5c) Compute the average cost of making one pool shade. 5d) Compute the incremental profit of making and selling the full demand oftrellises 5e) Compute the average cost of making one trellis. Resource usage approach Product Line Unit sales price Incremental revenue Material Design/Drafting Engineering Fabrication Powder coating b. Pool Shades Only d. Trellises Only Scheduling General factory Total cost Incremental Profit C. 5f) Given the assumptions above (long-term, small scale), would Chandler's management choose to make either or both of the products? Explain. Exhibit 1. Existing Capacity Available and Used and Capacity Costs (Annual) Resource Practical Capacity Cost Driver Purchased Cost of Capacity Used Capacity Design/Drafting 20,000 Design hours $500,000 19,500 Engineering 15,000 Engineering hours $750,000 14,750 Fabrication 40,000 Number of parts $30,000 39,000 Powder coating 400,000 Square feet $1,800,000 210,000 Scheduling/setup 750 Job setups $756,000 640 General factory 80,000 Machine hours $2,400,000 64,000 Exhibit 2. Resource Needs for Potential New Products Resource (Cost Level) Cost Driver Pool Shade Requirements Trellis Requirements Design/Drafting (product) Design hours 30 20 Engineering (product) Engineering hours 4 2 Fabrication (unit) Number of parts 40 22 Powder coating (unit) Square feet 1,600 170 Scheduling/setup (unit) Job setups 1 1 General factory (unit) Machine hours 80 10 Selling price/unit Pool Shade Trellis $42,500 Material cost/unit $18,750 Desired Profit on Sales 0.30 $4,300 Demand Pool shades 120 $700 Demand Trellises 60 Exhibit 3. Purchase Price of Additional Capacity Resource Capacity of next step Cost Driver Cost of Next Step Design/Drafting 2,000 Design hours $50,000 Engineering 2,000 Engineering hours $110,000 Fabrication 3,000 Parts $3,150 Powder coating 20,000 Square feet $100,000 Scheduling/setup 5,000 Job setups $4,000 General factory 2,000 Machine hours $36,000