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White Tiger Electronics produces CD players using an automated assembly line process. The standard cost of CD players is ​$148 per unit​ (labor, ​$25​; ​materials, ​$68​; and​ overhead, ​$55​). The sales price is ​$300 per unit. a. To achieve a 12 percent multifactor productivity improvement by reducing materials costs​only, one needs to reduce the materials cost by nothing percent.​(Enter your response as a percent rounded to two decimal​places.B. To achieve a 12 percent multifactor productivity improvement by reducing labor costs​ only, one needs to reduce the materials cost by nothing percent. ​(Enter your response as a percent rounded to two decimal​ places.a. To achieve a 12 percent multifactor productivity improvement by reducing overhead costs​only, one needs to reduce the materials cost by nothing percent.​(Enter your response as a percent rounded to two decimal​places.)

Respuesta :

jepessoa

Answer:

A) a 23.5% decrease in materials

B) a 64% decrease in labor costs

C) a 29.1% decrease in overhead

Explanation:

White Tiger's multifactor productivity = $300 / $148 = 2.027

if we want to increase the multifactor productivity by 12%, it will = 2.27

since we will not change the sales price, we must determine the new total cost:

$300 / cost = 2.27

cost = $300 / 2.27 = $132.16 ≈ $132, which represents a $16 decrease

A) materials ⇒ $16/$68 = 23.5%

B) labor costs ⇒ $16/$25 = 64%

C) overhead ⇒ $16/$55 = 29.1%

chilljain33

The correct statements will be as

  1. There will be a 23.5% decrease in the materials costs.
  2. The decrease in the labor costs will be around 64%.
  3. The overhead costs will decrease by about 29.1%.

The calculations are done after the change in the multifactor pricing by a rate of 12%, as given in the statement above.

Calculation of change in costs

  • The current multifactor productivity of White Tiger can be calculated by the use of the following formula,

  • [tex]\rm Multifactor\ Productivity= \dfrac{Sales\ Price\ per\ Unit}{Standard\ Cost}\\\\\\\rm Multifactor\ Productivity= \dfrac{\$300}{\$148}\\\\\rm Multifactor\ Productivity= 2.02\%[/tex]

  • It is given the multifactor pricing is expected to be changed by a rate of 12%, which will amount to 2.27% by adding 12% to the output value of 2.02%.

  • The new multifactor pricing will be $132 which is derived by dividing 2.27 with $300 meaning that there is a change of $16 in costs.

  • Now the calculation of change in costs will be

  • For Material Costs

  • [tex]\rm Change\ in\ Costs\ of\ Direct\ Material=\dfrac{\$16}{\$68}\\\\\rm Change\ in\ Costs\ of\ Direct\ Material=0.235[/tex]

  • There is a change of 23.5% in material costs.

  • Similarly, the labor costs will be changed by,

  • [tex]\rm Change\ in\ Labor\ Costs = \dfrac{16}{25}\\\\\rm Change\ in\ Labor\ Costs = 0.64[/tex]

  • So, there is a change of 64% in the labor costs.

  • Now for overhead costs,

  • [tex]\rm Change\ in\ Overhead\ Costs = \dfrac{16}{55}\\\\\rm Change\ in\ Overhead\ Costs = 0.291[/tex]

  • Showing that there is a change of 29.1% in the overhead costs of White Tiger CD manufacturing firm.

Hence, the changes in decrease of labor, overhead and material costs of White tiger CD manufacturing firm are calculated as 64% ; 29.1% and 23.5% respectively.

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