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Jamie Kincade

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Submitted By saroosha
Words 609
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Jamie Kincade
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2013
Cour Name
10/12/2013

Introduction
Mr. Kincade has been estimating the expected costs of a product J- 42. The purchasing agents have assured that the Chelsea would buy the product from him if the product would cost lesser that the present cost of $ 2.97. The new methods expected to be used were expected for large scale production in assembly lines. This large scale production would mean that the costs related to labor and major capital costs would also increase. Furthermore, the costs for inventories (purchasing and holding) would also incur and the company would have to bear these costs in case it implements the new assembly production.
Variable Costs
The variable costs expected for the new assembly methods are estimated as $ 147.42 (as per Sheet 1) per unit. The company if wants to reduce the costs, it would not be feasible for it to continue with this assembly production method. The variable costs include only those costs which would not incur if the company does produce the costs. The total variable costs for the different units expected vary according to these quantities. If the company has to produce 450,000 units per annum, the variable costs would be $ 66 million approximately (as in Sheet 1). In case the company has to pay for the overtime as well, the variable costs would increase to $ 366.2 per unit (as per Sheet 3).
Fixed Assets
The fixed costs include those costs which the company would have to incur even if the production of the product stops. These include rent, and salaries. These costs are uncontrollable and cannot be reduced in relation to reduction in

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