Engineering Management
TABLE 6.13
FIFO and LIFO Computation
Period Units In Unit Price Paid ($) Units Out
1 150 100 —
2 250 120 —
3 — — 180
4 — — 100
5 100 130 —
6 — — 200
7 100 140 —
8 — — 80
a. Determine the total LIFO prices for each stock withdrawal in periods 3, 4, 6,
and 8.
b. Repeat the same price computation using the FIFO technique.
b. If products A, B, and C are sold at $400, $350, and $150 per unit, respectively, what is the gross profit for each product?
c. What is the company’s total gross profit per month if all units produced are sold?
3. You are considering a good-looking Toyota hybrid car priced at $28,000 or an elegant GM luxury car at $24,000. The fuel efficiency is rated at 50 miles per gallon for the Toyota and 25 miles per gallon for the GM. The annual maintenance cost for both cars is about 0.5% of the car price. The gasoline in the local market is selling at $2.00 per gallon. The cars are to be driven about 10,000 miles per year. You plan to keep your car for five years only. At the end of the fifth year, the resale values of the Toyota and the GM are about 40% and 30%, respectively, of their original prices. The interest rate is 6%.
Which car is the better choice from the standpoint of costs?
4. Company X manufactures automotive door panels that may be made of either sheet metal or plastic sheet molding (glass fiber-reinforced polymer). Sheet metal bends well to the high-volume stamping process and has a low material cost. Plastic sheet molding meets the required strength and corrosion resistance and has a lower weight. The plastic-forming process involves a chemical reaction and has a slower cycle time. Table 6.18 summarizes the cost components for each. Assuming that the machinery and tooling have no salvage value at the end of their respective equipment lives, what is the annual production volume that would make the plastic panel more economical?
For production volume up to 536,156 panels per year, the plastic panels are more economical.
TABLE 6.18
Cost Components for Door Panels
Description Plastic Sheet Metal
Material cost ($ per panel) 5 2
DL cost ($ per hour) 40 40
FO ($ per year) 500,000 400,000
Maintenance expenses ($ per year) 100,000 80,000
Machinery investment ($) 3 million 25 million
Tooling investment ($) 1 million 4 million
Equipment life (years) 10 15
Cycle time (minutes per panel) 2 0.1
Interest rate (%) 6 6
5. Company X produces two products, A and B. Table 6.19 summarizes the cost structures of these two products over a three-month period. The company’s manufacturing operation is limited to 30,000 machine hours available per a three-month period. Furthermore, because of a prior sales commitment, the company must produce at least 1000 units of Product B. Determine the maximum profit the company can achieve in a three-month period.
TABLE 6.19
Cost Structures over Three Months
Product A Product B
Selling price ($ per unit) 10 12
Variable cost ($ per unit) 5 10
Fixed costs ($) 600 2,000
Machining time (hour per unit) 0.5 0.25
Product AProduct BProduct C
Number of Units Produced Per Month (-) 250400900
Total Material Costs Per Month ($) 500080004000
Labor Hours Per Unit (hr)43.51.5
Labor Rate Per Unit ($/hr) 252030
Machine Hour Per Unit (hr) 113
Sheet1
| Garpah for EM2 Notes | |||||||||||||||||||||
| Wye | Self-Leveling | ||||||||||||||||||||
| 0 | 606.48 | 1543.2 | |||||||||||||||||||
| 5 | 3256.48 | 3909.7 | |||||||||||||||||||
| 10 | 5906.48 | 6276.2 | |||||||||||||||||||
| 15 | 8556.48 | 8642.7 | |||||||||||||||||||
| 20 | 11206.48 | 11009.202 | |||||||||||||||||||
| Supply and Demand | |||||||||||||||||||||
| Supply | Demand A | Demand B | |||||||||||||||||||
| 10 | 1.8 | 7.8 | 9.5 | ||||||||||||||||||
| 15 | 3.1 | 5.6 | 7.3 | ||||||||||||||||||
| 20 | 4.5 | 4 | 5.7 | ||||||||||||||||||
| 25 | 6 | 2.8 | 4.5 | ||||||||||||||||||
| 30 | 8 | 2 | 3.7 | ||||||||||||||||||
| 35 | 3 | ||||||||||||||||||||
| 0 | US Treasury Bills | 6.5 | |||||||||||||||||||
| 5 | Bank CD | 8 | |||||||||||||||||||
| 10 | Industrial Bonds | 10 | |||||||||||||||||||
| 15 | Junk Bonds | 25 | |||||||||||||||||||
| TEXAS INSTRUMENTS FINANCIAL STATEMENTS | TEXAS INSTRUMENTS COMPNAY INFORMAITON AND INDUSTRY DATA | ||||||||||||||||||||
| Balance Sheets | 1959 | 1958 | |||||||||||||||||||
| December 31, 1958 and 1959 | (Depreciation & amortizatioin: | $8,135 | $4,924 | ) | |||||||||||||||||
| (thousands of dollars) | (Preferred diidens | dividends | 102 | 0 | ) | ||||||||||||||||
| (Other dividends | 185 | 0 | ) | ||||||||||||||||||
| 1959 | 1958 | ||||||||||||||||||||
| PAST RATIOS | |||||||||||||||||||||
| Cash | $17,856 | $10,841 | Fil in 1959 | 1958 | 1957 | 1956 | 1955 | 1954 | 1953 | ||||||||||||
| Receivables (net) | 29,053 | 19,350 | Current ratio | 2 | 2 | 2.2 | 2.5 | 2 | 1.9 | ||||||||||||
| Inventories | 23,282 | 6,869 | Acid test | 1.6 | 1.2 | 1.3 | 1.7 | 1.3 | 1 | ||||||||||||
| Prepaid expenses | 664 | 315 | Total debt to total assets | 52.30% | 47.90% | 41.20% | 30.40% | 46.00% | 53.30% | ||||||||||||
| Payments received on govt. contracts | -6,013 | -405 | Long-term debt as % of capitalization | 26.50% | 26.30% | 16.80% | 8.40% | 8.30% | 25.40% | ||||||||||||
| ————— | ————— | Total debt to net worth | 1.1 | 0.9 | 0.7 | 0.4 | 0.8 | 1.1 | |||||||||||||
| Total current assets | $64,842 | $36,970 | Days’ receivables (days) | 75.7 | 66.3 | 82.2 | 96.7 | 81.9 | 65.5 | ||||||||||||
| Ending inventory turnover (sales) | 13.4 | 7.8 | 7 | 7.6 | 8.1 | 5.7 | |||||||||||||||
| Property, plant & equiment | $60,806 | $26,773 | Ending inventory turnover (cost of sales) | 8.8 | 5.5 | 5.1 | 5.5 | 5.7 | 4.1 | ||||||||||||
| Accumulated depreciatoin | 20,083 | 10,281 | Net property trunover | 5.6 | 4.4 | 4.8 | 4 | 5.6 | 6.9 | ||||||||||||
| ————– | ————— | Total assets turnover | 1.7 | 1.8 | 1.7 | 1.5 | 1.6 | 1.8 | |||||||||||||
| Net property account | $40,723 | 17,492 | Net profit to total assets | 11.20% | 10.00% | 8.60% | 8.10% | 7.90% | 8.50% | ||||||||||||
| Patents, etc. (net) | 0 | 249 | Net profit to net worth | 23.40% | 19.20% | 14.60% | 11.60% | 14.70% | 18.30% | ||||||||||||
| Other assets | 429 | 80 | Net proft to net sales | 6.50% | 5.60% | 5.10% | 5.50% | 4.90% | 4.70% | ||||||||||||
| ————- | ————— | Gross profit | 34.00% | 29.50% | 26.50% | 27.40% | 29,3% | 29.20% | |||||||||||||
| Total assets | $105,994 | $53,791 | |||||||||||||||||||
| INDUSTRY INFORMATION | |||||||||||||||||||||
| Accrued wages, pensions, taxes, etc. | 21,309 | 10,696 | Current ratio | 2.3 | 2 | 2.1 | 2.1 | 2.2 | 1.6 | ||||||||||||
| Other current liabilities | 5,589 | 2,867 | Acid test | 1.2 | 1 | 1 | 1 | 1.1 | 0.6 | ||||||||||||
| ————— | ————— | Total debt to total assets | 40.00% | 52.80% | 46.10% | 47.20% | 42.60% | 56.10% | |||||||||||||
| Total Currnet liabilities | $37,266 | $18,900 | Long-term debt as % of capitalization | 12.30% | 16.70% | 17.10% | 14.40% | 11.30% | 7.80% | ||||||||||||
| Total debt to net worth | 0.7 | 1.1 | 0.8 | 1.1 | 0.7 | 1.3 | |||||||||||||||
| Long-term debt | 12,000 | 9,250 | Days’ receivables (days) | 44 | 45 | 42 | 42 | 39 | 33 | ||||||||||||
| Preferred stock | 3,265 | 0 | Ending inventory turnover (sales) | 6.2 | 5.3 | 4.8 | 5.5 | 5.4 | 4.7 | ||||||||||||
| Common stock | 3,915 | 3,257 | Ending inventory turnover (cost of sales) | 4.8 | 4.1 | 3.8 | 4.2 | 4.4 | 3.8 | ||||||||||||
| Paid in surplus | 8,205 | 6,228 | Net property trunover | 8.7 | 10.1 | 7.1 | 8.4 | 9 | 12.2 | ||||||||||||
| Retained earnings | 41,343 | 16,156 | Total assets turnover | 2 | 1.9 | 1.7 | 1.9 | 2 | 2.2 | ||||||||||||
| ————— | ————— | Net profit to total assets | 6.1 | 5.2 | 4.8 | 5.6 | 4.4 | 5 | |||||||||||||
| Total liabilities & net worth | $105,994 | $53,791 | Net profit to net worth | 10.20% | 11.00% | 9.00% | 10.60% | 7.70% | 11.40% | ||||||||||||
| Net proft to net sales | 3.10% | 2.70% | 2.80% | 2.90% | 2.30% | 2.30% | |||||||||||||||
| Gross profit | 22.80% | 21.70% | 20.60% | 23.20% | 18.60% | 19.90% | |||||||||||||||
| Operating Statements |
