The Colonial House Furniture Company manufactures twodrawer oak file cabinets th
ID: 453274 • Letter: T
Question
The Colonial House Furniture Company manufactures twodrawer oak file cabinets that are sold unassembled through catalogues. The company initiates production of 150 cabinet packages each week. The percentage of good-quality cabinets averages 83% per week, and the percentage of poor-quality cabinets that can be reworked is 60%. a. Determine the weekly product yield of file cabinets. b. If the company desires a product yield of 145 units per week, what increase in the percentage of good-quality products must result? 2-4. In Problem 2-3, if the direct manufacturing cost for cabinets is $27 and the rework cost is $8, compute the manufacturing cost per good product. Determine the manufacturing cost per product if the percentage of good-quality file cabinets is increased from 83% to 90%.
Explanation / Answer
a. Yield = (total input) (% good units) + (total input)(1 - % good units)(% reworked)
= 150 x 83% + 150 x (1 – 83%) x 60%
= 139.8 file cabinets
b. Yield = (total input) (% good units) + (total input)(1 - % good units)(% reworked)
145 = 150 x G + 150 x (1 – G) x 60%
Thus, G = 91.67%
Product Cost
Product cost = (direct manufacturing cost per unit)(input) + (rework cost per unit)(reworked units)/ yield
= (27 x 150 + 8 x 15)/ 139.8
= $29.8
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