Target costing — OpenTuition Forums

AAttraction1y ago

Component 2 (Wiring) – in an ideal situation 25 cm of wiring is needed for each completed radio. However, there is some waste involved in the process as wire is occasionally cut to the wrong length or is damaged in the assembly process. Edward Co estimates that 2% of the purchased wire is lost in the assembly process. Wire costs $0·50 per metre to buy. Assembly labour – these are skilled people who are difficult to recruit and retain. Edward Co has more staff of this type than needed but is prepared to carry this extra cost in return for the security it gives the business. It takes 30 minutes to assemble a radio and the assembly workers are paid $12·60 per hour. It is estimated that 10% ofhours paid to the assembly workers is for idle time. Someome help to Calculate labour per hr and meterial per unit

Ggoharstar1y ago#1

1. Material Cost per Unit (Wiring) Ideal requirement: 25 cm = 0.25 meters per radio Waste: 2% of wire is wasted, so only 98% is usable Therefore, to get 0.25 m of usable wire, we must purchase more than that ? Adjusted Wire Requirement per Unit: Required wire to buy = 0.25 0.98 = 0.2551 meters (rounded to 4 dp) Required wire to buy= 0.98 0.25 ? =0.2551 meters (rounded to 4 dp) ? Material Cost per Unit: 0.2551 × 0.50 = $ 0.1276 ? $ 0.13 0.2551×0.50=$0.1276? $0.13 ? 2. Labour Cost per Hour (Including Idle Time) Time to assemble = 30 minutes = 0.5 hours per radio Hourly wage = $12.60 Idle time = 10% ? Only 90% of hours are productive ? Effective Productive Hours: To get 0.5 productive hours, we need to pay for more time. Paid hours = 0.5 0.9 = 0.5556 hours (rounded to 4 dp) Paid hours= 0.9 0.5 ? =0.5556 hours (rounded to 4 dp) ? Labour Cost per Unit: 0.5556 × 12.60 = $ 7.0006 ? $ 7.00 0.5556×12.60=$7.0006? $7.00 ? 2. Labour Cost per Hour (Including Idle Time) Time to assemble = 30 minutes = 0.5 hours per radio Hourly wage = $12.60 Idle time = 10% ? Only 90% of hours are productive ? Effective Productive Hours: To get 0.5 productive hours, we need to pay for more time. Paid hours = 0.5 0.9 = 0.5556 hours (rounded to 4 dp) Paid hours= 0.9 0.5 ? =0.5556 hours (rounded to 4 dp) ? Labour Cost per Unit: 0.5556 × 12.60 = $ 7.0006 ? $ 7.00 0.5556×12.60=$7.0006? $7.00 ?