Question

Sundsvall Sailing has a new process for manufacturing the MD2024 foil boards it hopes to debut in the 2024 Olympics. The innovation has reduced the time it takes for a foil board to be made. It now takes 8 hours for a board to be made. Previously it took 13 hours to make the MD2024 board. Of the three-stage process makes one board each hour on average and each board is worth $1,500.

Required:
How much is the reduction in work-in-process value?

Answer 1

Answer:

Sundsvall Sailing

The reduction in work-in-process value = $576.96

Explanation:

a) Data and Calculations about MD2024 Foil Boards:

Old time to make the MD2024 board = 13 hours

Cost of making the board = $1,500

The cost per hour for making the board = $115.38 ($1,500/13)

The new cost for making the board = $923.04 ($115.38 * 8)

Therefore, the reduction in the work-in-process value = $576.96 ($1,500 - $923.04)

This reduction of $576.96 represents about 38.5% reduction ($576.96/$1,500 * 100).