Business, 31.01.2021 23:10 Jasten

A part costs $5 to manufacture (the cost of revenue or COGS, Cost of Goods Sold, is $5 per part). Included in the part cost is expected scrap of $0.50 per part due to scrap that is created as a normal characteristic of the manufacturing process. Through a process change, an engineer cuts the scrap rate in half, saving $0.25 per part. The price of the part is $6.25 each (revenue or sales generated is $6.25 per part). It is expected the company will produce and sell 500,000 parts in a year and will keep the price at $6.25 each even after the process change is implemented. Each part (a-e) is worth 6 points. a) What was the expected gross margin % before implementing the process change %

b) Will gross margin increase or decrease for the year after implementing the process change? INDICATE INCREASE OR DECREASE

c) What will be the new gross margin % for the year after implementing the process change? %

d) Will gross profit increase or decrease for the year after implementing the process change? INDICATE INCREASE OR DECREASE

e) By how much will gross profit increase or decrease for the year after implementing the process change? $

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A part costs $5 to manufacture (the cost of revenue or COGS, Cost of Goods Sold, is $5 per part). In...

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