Question

Analyze Skidmore Electronics

Skidmore Electronics manufactures consumer electronic products. The company has three assembly labor classifications, S-1, S-2, and S-3. The three classifications are paid $15, $18, and $22 per hour, respectively. The assembly activity for a new smartphone is as follows:

Analyze Skidmore Electronics Skidmore Electronics manufactures consumer electronic products. The company has three assembly labor classifications, S-1, S-2, and S-3. The three classifications are paid $15, $18, and $22 per hour, respectively. The assembly activity for a new smartphone is as follows: Activity-Base Activity Rate per Usage Hour (S-2) Activity Cost Activity (hrs. per unit) х Assembly 0.40 $18.00 $7.20 A product engineer proposes using a higher-rated employee to perform the assembly on the new phone. His analysis has shown that an S-3 employee can perform the assembly in 0.35 hour per unit. a. Determine the Assembly activity cost using the S-3 labor classification. Round your answers to two decimal places. Activity-Base Activity Rate per Usage Hour (S-3) Activity (hrs. per unit) Activity Cost х Assembly b. Is the product engineer's proposal supported?

Answer 1

a. The assembly activity cost using the S-3 labor classification

Activity Activity-base usage (hrs. per unit) 0.35 Activity rate per hour (5-3) Activity cost Assembly X $ 22.00 = $ 7.70

b. The product engineer's proposal is not supported since it leads to a higher assembly activity cost of $7.70 compared to the existing practice which only costs $7.20.

The increase in assembly cost for a new smartphone if the product engineer's proposal is adopted: $7.70 - $7.20 = $0.50

Explanation:

• Skidmore Electronics has three types of employees for assembly work.
• 
  It will have to pay If Skidmore Electronics uses this category S-1 S-2 $15 per hour $18 per hour $22 per hour S-3
  
• Presently, the company uses S-2 class of labor for assembly work.
• The product engineer proposes to use S-3 class.