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Manufacturing 0 14-1 SECTION

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Section Objective Compute: prime cost of manufacturing an item

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Key Words to Know manufacturer Makes, or produces, a product. direct material cost The cost of the goods or materials used to make a product.

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Key Words to Know direct labor costs The cost of the labor used to make a product, such as wages paid to employees. prime cost The total of the direct material cost and the direct labor cost used to make a product, often expressed on a per-unit basis.

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Prime Cost = Direct Material + Direct Labor per Item Cost per Item Cost per Item Formula

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Electric Supply, Inc., produces aluminum circuit housings. The machine operator stamps 20 housings from each strip of aluminum. Each strip costs $1.80. The operator can stamp 720 housings per hour. The direct labor charge is $19.50 per hour. To the nearest tenth of a cent, what is the prime cost of manufacturing a circuit housing? Do Now

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Find the direct material cost per item. $1.80 ÷ 20 = $0.09 Answer: Step 1

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Find the direct labor cost per item. $19.50 ÷ 720 = $0.02708 or $0.027 Answer: Step 2

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Find the prime cost per item. Direct Material + Direct Labor Cost per Item $0.09 + $0.027 = $0.117 Example 1 Answer: Step 3

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Jenna Fields is a die cut machine operator. She makes 105 shoe soles from one piece of rubber. Each sheet of rubber costs $3.95. Jenna is able to make one every 5 seconds. The direct labor cost is $17.50 per hour. What is the prime cost of manufacturing one shoe sole to the nearest cent? Do Now 2

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$0.62 Practice 1 Answer

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Manufacturing 14-1 END OF SECTION

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Break-Even Analysis 14-2 SECTION

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Section Objective Calculate: break-even point in the number of manufactured units

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Key Words to Know break-even analysis- Determining how many units of a product must be made and sold to cover the cost of producing it.

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Key Words to Know break-even point- The point where income from sales on a product equals what it cost to produce the product.

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Key Words to Know fixed costs Production costs that remain the same no matter how much you produce, such as rent and salaries.

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Key Words to Know variable costs The costs of producing a product that vary directly with the number of units produced, such as raw materials and packaging.

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Break-Even Point in Units = Total Fixed Costs ____ ________ Selling Price per Unit – Variable Costs per Unit Formula

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Token Metal Products manufactures can openers. They plan to manufacture 750,000 hand-held can openers to be sold at $0.44 each. The fixed costs are estimated to be $142,570. Variable costs are $0.19 per unit. How many can openers must be sold for Token Metal Products to break even? Do Now

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Step: Find the break-even point in units. Total Fixed ÷ (Selling Price – Variable Costs) Costs ( per Unit per Unit ) $142,570.00 ÷ ($0.44 − $0.19) = $142,570.00 ÷ $0.25 = 570,280 Answer:

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Yell Textiles manufactures rugs. It plans to manufacture small rugs to be sold at $22.99 each. The fixed costs are estimated to be $265,490. Variable costs are $16.82 per unit. How many rugs must be sold for Yell Textiles to break even? Practice 1

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43,029 Practice 1 Answer

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Break-Even Analysis 14-2 END OF SECTION

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