Engineering Economic Analysis

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Problems 553

J-21 For Andrew's Electronic Instruments, calculate the
interest coverage and net profit ratio. Is Andrew's
business healthy? '

Income Statement for Andrew's

Electronics for End of Year 2004

(thousands)

Revenues

Operaing revenues

Sales

(minus)Returns

Total operating revenues

Nonoperating revenues

Interest receipts

Stock revenues

Total nonoperating revenues

Total revenues, R

Expenses

Operating expenses

Cost of goods and services sold

Labor

Materials

Indirect cost

Selling and promotion

Depreciation

General and administrative

Lease payments

Total operating expenses

Nonoperating expenses

Interest payments

Total nonoperating expenses

Total expenses, E

Net income before Taxes, R - E

Incomes taXes

Net profit (Loss) for the year 2004

$395

-15

380

50.

25

75

455

200

34

68

20

30

10

10

372

22

22

394

61

30

31

22 LeGaroutte Industries makes industrial pipe manu-

facturing equipment. Use direct-labor hours as the

burden vehicle, and compute the total cost per unit

for each modelgivenin the table.Totalmanufacturing

indirect costs are $15,892,000,and there are 100,000

units manufacturedper year for Model S, 50,000 for

ModelM,and 82,250 for Model G.

Item Model S ModelM Model G

Direct-materialcosts $3,800,000 $1,530,000 $2,105,000

Direct-laborcosts 600,000 380,000 420,000

Direct-laborhours 64,000 20,000 32,000

(Answer:$132; $93; $84)

18-23 Par Golf Equipment Company produces two types of

golf bag: the standard and deluxe models. The total

indirect cost to be allocated to the two bags is $35,000.

Determine the net revenue that Par Golf can expect

from the sale of each bag.

(a)Use direct-labor cost to allocate indirect costs.

(b)Use direct-materials cost to allocate indirect

costs.

Data Item

Direct-labor cost

Direct-material cost

Selling price

Units produced

Standard

$50,000

35,000

60

1800

Deluxe

$65,000

47,500

95

1400

18-24 RLW-II Enterprises estimated that indirect manufac-

turing costs for the year would be $60 million and

that 12,000 machine-hours would be used.

(a) Compute the predetermined indirect cost appli-

cation rate using machine hours as the burden

vehicle.

(b) Determine the total cost of production for a prod-

uct with direct material costs of $1 million, direct-

labor costs of $600,000, and 200 machine-hours.

(Answers:$5000, $2.6 million)

18-25 Categorize each of the following costs as direct or

indirect. Assume that a traditional costing system is

in place.

Machine run costs

Machine depreciation

Material handling costs

Cost of materials

Overtime expenses

Machine operator wages

Utility costs

Support (administrative)

staff salaries

Cost to market the product

Cost of storage

Insurance costs

Cost of product sales force

Engineering drawings

Machine labor

Cost of tooling and fixtures