The Single Milling Machine at Stout Manufacturing Was Severely Overloaded

question 54

Multiple Choice

The single milling machine at Stout Manufacturing was severely overloaded last year. The plant operates eight hours per day, five days per week, and 50 weeks per year. Management prefers a capacity cushion of 15 percent. Two major types of products are routed through the milling machine. The annual demand for product A is 3000 units and 2000 units for product B. The batch size for A is 20 units and 40 units for B. The standard processing time for A is 0.5 hours/unit and 0.8 for B. The standard setup time for product A is 2 hours and 8 hours for product B. How many new milling machines are required if Stout does not resort to any short- term capacity options?

• A) no new machines
• B) 1 or 2 new machines
• C) 3 or 4 new machines
• D) more than 4 new machines

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Definitions:

Standard Costs

The expected costs associated with producing a product or performing a service, used for budgeting and performance analysis.

Hours

A measure of time representing 60 minutes, often used to track labor or production time in business.

Cost of Goods Sold

The expenses directly associated with manufacturing the products that a company sells.

Variances

Differences between planned or expected financial outcomes and the actual results, typically used in budgeting and performance assessment.