Overland Automotive Company is considering on manufacturing a new brand of car.Given the current product and process designs,the cost data are:
The company expects the selling price to be $20,000 and has set a target profit of $5,000.
A supplier told Overland that it could purchase a couple of similar components under a different brand name at a lower price.This would result in cost savings of $2,000 per car.Furthermore,the company found that it could redesign its manufacturing process to cut down on both inspection labor and worker labor,which would result in cost savings of $1,000 per car.
Definitions:
Activities Performed
The actions or operations carried out by an individual or organization in pursuit of certain objectives.
Equivalent Units
A concept used in cost accounting to express the amount of work done on incomplete products in terms of fully completed units of output.
Fully Completed
A status indicating that a task, project, or product has been finished with all necessary requirements met.
JIT
Just-In-Time, an inventory management methodology aimed at reducing waste and improving efficiency by receiving goods only as they are needed in the production process.
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