Finance One Batch Takes 20 Hours to Essay

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Total Length: 352 words ( 1 double-spaced pages)

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Finance

One batch takes 20 hours to make and produces 400L of ice cream. Sales last year totaled 50,000,000 liters of ice cream and the plant was working at full capacity. Therefore, the plant's capacity in working hours is:

50,000,000 / 400 = 125,000 batches * 20 hours per batch = 2.5 million machine hours. That is 285 machines in the plant, each working 24 hours per day.

Fixed manufacturing costs are $3,000,000 in total. The plant produces 50,000,000 liters of ice cream last year. Thus costs are 3,000,000 / 50,000,000 = $0.06 per liter of ice cream.

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Variable factory overhead is $1,000,000 for the plant, or one-third of the fixed manufacturing overhead. This means that the variable factory overhead is going to be $0.02 for every liter of ice cream.

Based on the costs of inputs, the total cost of a liter of ice cream is as follows:

A2015893 Ice Cream

$/Liter

Milk

Cream

Sugar

Egg

Flavoring

Direct Labor

Tubs/L

0.02

Fixed Mfg

0.06

Variable Ovhd

0.02

Total

$0.60

2. Each liter.....

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