The Sandoval Company has four process engineers that are eac

The Sandoval Company has four process engineers that are each able to process 1,600 design changes. Last year 5,250 design changes were produced by the four engineers. Each engineer is paid $60,000 per year.

a) Refer to Figure. Calculate the activity rate per change order.

b) Refer to Figure. Calculate the unused capacity.

c) What is the unused capacity in dollars?

Solution

(a)Total engineer cost =60000*4=240000

(b)Estimated annual design changes =1600*4=6400

C) activity rate per change order =(total engineer cost /estimated annual changes) =240000/6400=37. 5 per change

Calculation of unused capacity =(Estimated annual design changes - actual design changes) =6400-5250=1150 design changes

Calculation of unused capacity in dollars =unused capacity*rate per change order. =1150*37.5=43125