Venus Computer can produce 23,000 personal computersa year on its daytime shift.
ID: 1252117 • Letter: V
Question
Venus Computer can produce 23,000 personal computersa year on its daytime shift. The fixed manufacturing costs per yearare $2million and the total labor cost is $9,109,000. To increaseits production to 46,000 computers per year, Venus is consideringadding a second shift. The Unit labor cost for the second shiftwould be 25% higher then the day shift, but the total fixedmanufacturing costs would increase only to $2.4 million from $2million.(a) Compute the unit manufacturing cost for the daytime shift.
(b) would adding a second shift increase or decrease the unitmanufacturing cost at the plant?
Explanation / Answer
(a) Manufacturing Cost for the daytime shifts: Total cost = Manufacturing cost + labor cost = 2,000,000+9,109,000 = 11,109,000 Unit Cost when 23000 computers produced = = 11,109,000 23,000 = 483 If considering only the manufacturing cost then = Manufacturing cost No. of products = 2 million 23000 = $87 (b) Adding a second shift would decrease the unit manufacturing cost at the plant Explanation: Unit Cost when 46000 computers produced = = 13,786,250 46,000 = $300 If considering only the manufacturing cost then = Manufacturing cost No. of products = 2.4 million 46000 = $52
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