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Report objective Analyze the case of Camberland metal industries and identify the following 5 particular issues 1What is the approximate cost of producing the curled metal pads Usually costs take two forms fixed and variable Of the two forms fixed costs do not vary with production or sales revenue In this case the fixed component of the estimate of pad costs exhibit 6 is unreasonable because of the assumption by which the fixed charge must equal to 360 of direct labor to cover the overhead of its large engineering staff Besides to the new product little engineering had been done and excess capacity had been used for manufacturing By activity based costing system there is no reason to charge 360 of labor as fixed costs The fixed rate per unit may vary with the production volume If assuming a 5 years linear depreciation period for the additional equipment the additional fixed cost incurred is 750005 12 250 5 per pad It is less than the difference of labor costs between the two options at any size So CMI would be better to add new equipment for the new product Given the other fixed costs by the ratio 045 on average of fixed to variable in CMIs previous income statements we can estimate the approximate cost for the popular size of 11 12 as follows Material 1564 labor 11641045 500 446 per pad 2Based on the Colerick and Fazio studies what is the estimated saving per metal pad Cumberland Metal Industries Value Creation Analysis Colerick TestFazio Test AsbestosCMISavingsAsbestosCMISavings Material costs Cost per set 5040 Number of sets required 201501 Total material100001000200002000 Pile Driving Costs Equipment Rental Average cost per hour86868686 Leads8888 Labor44444444 Total Costs138138138138 Estimated time costs Total feet driven15000150001200012000 fthr rate150200160200 Time required hrs100757560 Total cost138001035034501035082802070 Cost of changing pads Number of changes required201501 Time per change hrs033007033007 Total hours reqd hrs6670071667007 Total cost
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