Question

The Boeing Company produces commercial aircraft. The following passage is taken from Management's Discussion and Analysis, included in Boeing's 2005 Annual Report.
"Commercial aircraft production costs include a significant amount of infrastructure costs, a portion of which do not vary with production rates." As part of its accounting practices, Boeing spreads the fixed infrastructure costs over the "accounting quantity" for each type of airplane. The accounting quantity is the estimated number of planes that will eventually be produced. At the end of 2005, Boeing's accounting quantity for the 737 Next-Generation plane was 2,800. At the end of 2011, the accounting quantity for this plane had risen to 6,200.

Required

a. What effect would this change in accounting quantity have on the total fixed infrastructure cost of the 737 Next-Generation plane?
b. What effect would this change in accounting quantity have on the unit cost of the 737 Next-Generation plane?




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  • CreatedFebruary 21, 2014
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