Employees of Duwel Power Tools are paid $4.20 per hour for an 8-hour shift. Currently, production...

 

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Employees of Duwel Power Tools are paid $4.20 per hour for an 8-hour shift. Currently, production has been 3 units per hour per worker. A management consultant team has proposed the following piece rate incentive plan. (a) $1.40 per unit up to 27 units per 8-hour day (b) $1.44 per unit from 27 through 29 units per day, for all units (c) $1.48 per unit from 30 through 32 units per day, for all units (d) $1.51 per unit from 33 through 36 units per day, for all units (e) $1.535 per unit for 37 units and above, for all units Overhead consists almost entirely of depreciation, taxes, and insurance. Con- sequently, it is assumed that the current overhead rate of $5.50 per labor hour will remain constant. Required: (1) An analysis of the proposal showing unit conversion cost for production of 24, 27, 30, 33, and 37 units. (2) An opinion as to whether or not (a) management and (b) employees would be receptive to such a plan. Employees of Duwel Power Tools are paid $4.20 per hour for an 8-hour shift. Currently, production has been 3 units per hour per worker. A management consultant team has proposed the following piece rate incentive plan. (a) $1.40 per unit up to 27 units per 8-hour day (b) $1.44 per unit from 27 through 29 units per day, for all units (c) $1.48 per unit from 30 through 32 units per day, for all units (d) $1.51 per unit from 33 through 36 units per day, for all units (e) $1.535 per unit for 37 units and above, for all units Overhead consists almost entirely of depreciation, taxes, and insurance. Con- sequently, it is assumed that the current overhead rate of $5.50 per labor hour will remain constant. Required: (1) An analysis of the proposal showing unit conversion cost for production of 24, 27, 30, 33, and 37 units. (2) An opinion as to whether or not (a) management and (b) employees would be receptive to such a plan.

Answer rating: 100% (QA)

SOLUTION To analyze the proposed piece rate incentive plan and determine the unit conversion cost for different production levels we need to calculate ... View the full answer