Question

Unter Components manufactures low-cost navigation systems for installation in ride-sharing cars. It sells these systems to various car services that can customize them for their locale and business model. It manufactures two systems, the Star100 and the Star150, which differ in terms of capabilities. The following information is available. Costs per Unit Star100 Star150 Direct materials $ 62 $ 72 Direct labor 40 50 Variable overhead 20 25 Fixed overhead 87 117 Total cost per unit $ 209 $ 264 Price $ 300 $ 400 Units sold 4,000 2,000 The average wage rate is $25 per hour. Variable overhead varies with the quantity of direct labor-hours. The plant has a capacity of 20,000 direct labor-hours, but current production uses only 10,400 direct labor-hours. Required: a. A nationwide car-sharing service has offered to buy 2,600 Star100 systems and 2,600 Star150 systems if the price is lowered to $210 and $260, respectively, per unit. a-1. If Unter accepts the offer, how many direct labor-hours will be required to produce the additional systems

Answer 1

Answer:

The answer is 9,360 direct labor-hours.

Explanation:

The first step is to calculate the direct labor-hours per unit. The second step is to calculate the total direct labor-hours required to produce the additional systems.

Step 1

Direct labor-hours per unit = Direct labor / Average wage rate per hour

Star100: Direct labor-hours per unit = 40 / $25 = 1.6

Star150: Direct labor-hours per unit = 50 / $25 = 2

Step 2

Total labor-hours required = Direct labor-hours per unit x Number of systems required

Star100: Total labor-hours required = 1.6 x 2,600 = 4,160

Star150: Total labor-hours required = 2 x 2,600 = 5,200

Combined direct labor-hours required = 4160 + 5,200 = 9,360