M4 Engineering produces materials used in airplane engines. Management has been concerned that material costs per...

 

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M4 Engineering produces materials used in airplane engines. Management has been concerned that material costs per pound are too high. The product is processed over two shifts per day. The following data have been collected for analysis: July Data Total materials costs Total number of pounds produced Cost per pound Shift 1 Shift 2 Total Shift 1 Shift 2 Total Shift Item Shift Line 1 $36,000 45,500 $81,500 Line 1 6,000 6,500 12,000 Amount $335,050 50,400 $6.65 Materials Costs by Production Line Line 2 Line 3 $36,000 $40,300 45,500 50,250 $81,500 $90,550 Pounds Produced by Production Line Line 2 Line 3 6,000 6,200 6,500 6,700 12,000 12,400 Line 4 $36,000 45,500 $81,500 Line 4 6,000 6,500 12,000 Total $148,300 186,750 $335,050 Total 24,200 26,200 50,400 Assume you have interviewed the shift supervisors in an attempt to discover the problems causing material costs to be inflated. A summary of their responses are given below. Plant Manager: I just received a directive from headquarters to increase my production rates. I talked to the shift supervisors about kicking up our production from our old average of 6,000 pounds per shift. The Shift 1 supervisor did not seem to think that this was a good idea. Shift 1 Supervisor: I have decided to keep first-shift production on lines 1, 2, and 4 at 6,000 pounds per shift. That's because I remember the last time we had our production rates increased. Our materials consumption shot through the roof. Therefore, I'm running a small experiment on Line 3 before increasing the speeds across the whole shift. I know the Shift 2 Supervisor has increased production on the second shift, but he was just brought in from another plant that has new machinery. I don't expect he's had the historical experience with these older machines that I've had. Shift 2 Supervisor: I've increased production rates on my shift, but it's hard to tell how things are going. I thought the new directive made plenty of sense. Back at my previous plant location, we ran machines at 7,000 pounds per shift without any trouble. These older machines don't seem to be running nearly as well as the machines back at my old place. I guess when we see the numbers at the end of the month we'll have a good feel for it. Provide an analysis of the data that will assist management to determine whether or not the increase in production rates is having a favorable impact on production costs. Hint: consider the cost per pound under the different scenarios. Does the increase in production change the costs? What would you advise management? M4 Engineering produces materials used in airplane engines. Management has been concerned that material costs per pound are too high. The product is processed over two shifts per day. The following data have been collected for analysis: July Data Total materials costs Total number of pounds produced Cost per pound Shift 1 Shift 2 Total Shift 1 Shift 2 Total Shift Item Shift Line 1 $36,000 45,500 $81,500 Line 1 6,000 6,500 12,000 Amount $335,050 50,400 $6.65 Materials Costs by Production Line Line 2 Line 3 $36,000 $40,300 45,500 50,250 $81,500 $90,550 Pounds Produced by Production Line Line 2 Line 3 6,000 6,200 6,500 6,700 12,000 12,400 Line 4 $36,000 45,500 $81,500 Line 4 6,000 6,500 12,000 Total $148,300 186,750 $335,050 Total 24,200 26,200 50,400 Assume you have interviewed the shift supervisors in an attempt to discover the problems causing material costs to be inflated. A summary of their responses are given below. Plant Manager: I just received a directive from headquarters to increase my production rates. I talked to the shift supervisors about kicking up our production from our old average of 6,000 pounds per shift. The Shift 1 supervisor did not seem to think that this was a good idea. Shift 1 Supervisor: I have decided to keep first-shift production on lines 1, 2, and 4 at 6,000 pounds per shift. That's because I remember the last time we had our production rates increased. Our materials consumption shot through the roof. Therefore, I'm running a small experiment on Line 3 before increasing the speeds across the whole shift. I know the Shift 2 Supervisor has increased production on the second shift, but he was just brought in from another plant that has new machinery. I don't expect he's had the historical experience with these older machines that I've had. Shift 2 Supervisor: I've increased production rates on my shift, but it's hard to tell how things are going. I thought the new directive made plenty of sense. Back at my previous plant location, we ran machines at 7,000 pounds per shift without any trouble. These older machines don't seem to be running nearly as well as the machines back at my old place. I guess when we see the numbers at the end of the month we'll have a good feel for it. Provide an analysis of the data that will assist management to determine whether or not the increase in production rates is having a favorable impact on production costs. Hint: consider the cost per pound under the different scenarios. Does the increase in production change the costs? What would you advise management?

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To analyze the impact of the increase in production rates on production costs we need to calculate the cost per pound under different scenarios Well c... View the full answer