Analyze Life Force Fitness, In

Analyze Life Force Fitness, Inc.

Life Force Fitness, Inc., assembles and sells treadmills.Activity-based product information for each treadmill is asfollows:

Activity Activity-BaseUsage(hrs. per unit) X Activity Rateper Hour = ActivityCost
Motor assembly 1.50    $20 $30.00   
Final assembly 1.00    18 18.00   
Testing 0.25    22 5.50   
Rework 0.40    22 8.80   
Moving 0.20    15 3.00   
Activity cost per unit $65.30   

All of the activity costs are related to labor. Management mustremove $2.00 of activity cost from the product in order to remaincompetitive.

Rework involves disassembling and repairing a unit that failstesting. Not all units require rework, but the average is 0.40hours per unit. Presently, the testing is done on the completedassembly; but much of the rework has been related to motors, whichcan be tested independently prior to adding the motor to thetreadmill during final assembly. Thus, motor issues can bediagnosed and solved without having to disassemble the completetreadmill. This change will reduce the average rework per unit byone-quarter.

a. Determine the new activity cost per unitunder the rework improvement scenario. Round your answer to2 decimal place.


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Analyze Life Force Fitness, Inc.
Whole allocation chart is already given and we have toadjust only the changes in rework time per unit.
Amount $
Current rework hour per unit                0.40
Reduction by 1/4th                0.10
Revised rework hour per unit                0.30
Answer a
Calculation of new activity cost per unit under the reworkimprovement scenario:
Activity-BaseUsage Activityrate
Activity (hrs. perunit) per Hour ActivityCost
Motor assembly                1.50              20.00     30.00
Final assembly                1.00              18.00     18.00
Testing                0.25              22.00       5.50
Rework                0.30              22.00       6.60
Moving                0.20              15.00       3.00
Activity cost perunit     63.10

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