Please help!! Please show work to get credit. In a sell or process further decis

Question

Please help!! Please show work to get credit.

In a sell or process further decision, which of the following costs are relevant?

I. A variable production cost incurred prior to the split-off point.
II. An avoidable fixed production cost incurred after the split-off point.

0.15 0.05 0.45 0.18 Diorio Corporation keeps careful track of the time required to fill orders. The times recorded for a particular order appear below: The manufacturing cycle efficiency (MCE) was closest to: In a sell or process further decision, which of the following costs are relevant? A variable production cost incurred prior to the split-off point. An avoidable fixed production cost incurred after the split-off point.

Explanation / Answer

Hi,

Please find the answer as follows;

Part A:

MCE = Value Added Time/Throughput Time

Value Added Time = 1.4 (Process Time)

Throughput Time = Process time + Inspection time + Move time + Queue time = 1.4 + .1 + 2.7 + 5.3 = 9.5

MCE = 1.4/9.5 = .147 or .15

Option A (.15) is correct.

Part B:

Option B (An avoidable fixed production cost incurred after the split-off point) is correct.

Thanks.

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