Lipman Bottle Company

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Variable Cost per Thousand
Table 1

*hours per thousand bottles= setup time/ median order size; total time per thousand= hours per thousand bottles + run time per thousand; operating cost per thousand= total time per thousand * variable cost per machine-hour; direct cost to manufacture= cost per thousand passes+ operating cost per thousand; total direct cost per thousand= shipping + scrap + direct cost to manufacture As shown in the Table 1, it is a part of question1. In the textbook, it has illustrated the 10 month income statement, containing variable cost per machine per hour and cost per thousand passes, which are used for the calculations. For the question 1, it requires to compute two order quantity ranges- 5000- 9999 and 100000- 249999, using the median of the order sizes for simplification. Setup time for a job is a factor of variable cost, so in the table, it has setup time, and uses it to get hours per thousand bottles. The formula is demonstrated below the Table 1. The setup time and run time per thousand adding together can get the total time of working per thousand, which means that when the company operates machines, it will spend cost, and should be included in variable. As a result, total time increases variable cost per machine per hour. Another thing should be mentioned here is the automatic and semiautomatic machine. The question demands automatic feature, but Lipman Company only has eight semiautomatic machines; the run time is 1.0 hour per bottle of one-separation job and size 0-1 ounce. The run time is different for different sizes. Moreover, one-separation and two-separation jobs are also different. The scrap and shipping to New York- New Jersey Area are decided by diverse sizes. In addition, cost per thousand passes, scrap, and shipping are all parts of variable cost. So, variable cost comprehends operating cost per thousand, cost per thousand passes, scrap, and shipping. All the answers of question 1...
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