The Redwood City Plant of America Industries makes two types

The Redwood City Plant of America Industries makes two types of rotators for automobile engines, nicknamed as CHIP and DALE.

Assume now that America Industries has observed the idle (i.e., free, unused) capacity at its Redwood City Plant with respect to machine setup activity. Based on new estimates, the cost figure presented above includes the cost of idle capacity which is estimated at about 10% of the total cost of setup activity.

Discuss how and why this new piece of information affects your calculations in part. Determine the revised product costs per unit taking into account information about the idle capacity.


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