Question

Question 5.

Embrace Inc. manufactures a series of glasses. Data from last three years are given below:

	2017	2018	2019
Direct material partial productivity	0.95	0.92	0.88
Overtime hours worked	82	77	72
Defect rate	0.8	1.2	1.9
On time delivery	99%	97%	96%
Set up time	7	6.6	6
Numbers of machine breakdowns	3	4	5
Downtime (hours)	8	9	10
Number of products return	11	13	15
Throughput time (hours)	9.5	8	7

You are the controller of Embrace Inc, have been asked by the CFO of the company to review the performance over the past three years using balance scorecard. Use the above given information in your assessment and write a summary report to be presented to the CFO.

Answer 1

Required a)

Sunk Costs are the original cost of the existing machine that has been incurred and the accumulated depreciation the existing machine.

Required b)

Relevant Costs are:

• Original Cost of the New machine
• Current salvage value of the old machine
• Annual Operating expenses of both the machines

Required c)

Net cash flows over the next 5 years from the new machine

Required d)

Other relavant items are:

• Installation cost if any
• Tax effect on the transaction
• Quality of the output using the new machine