PRODUCTION OF SPECIALIZED EQUIPMENT Company A 10 th of August 2017. - презентация

1 PRODUCTION OF SPECIALIZED EQUIPMENT Company A 10 th of August 2017

2 INITIAL DATA Tasks Calculate non profit price Reduction of losses at the buyer's refusal We have Almost completed a specialized piece of equipment. Work to date costs are $24,795 Additional direct materials $2,500 The design for the equipment $1,500 Potential customer

3 ADDITIONAL PRODUCTION Welding department 1 worker $280 wage rate 9 weeks $0 Machining department 2 workers $240 wage rate 5 weeks $2,400 Assembly department 2 workers $200 wage rate 8 weeks $3,200 Total direct wages $5, weeks Due to the incomplete workload of the welding department, additional involvement of workers will not be required

4 COST ITEM RATIO Cost items Welding department Machining department Assembly department Base Variable overheads15% Direct wages Fixed production overhead 120%80%40%Direct wages Fixed administration 4,4% Direct wages +Variable overheads + Fixed production overhead

5 COST ITEMS OF NON PROFIT PRICE

6 NON PROFIT PRICE

7 REDUCTION OF LOSSES In case of customers refusing we plan to Use materials ($2,500) for an other project after modification. Cost of modification is $1,954. This will allow to save $4,000 on materials Sale the design for the equipment for $1,500 Sale the part of materials as scrap for $5,200 Total reduction of losses will be $4,746 or 18%