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7 December, 13:03

A firm has redesigned its production process so that it now takes 10 hours for a unit to be made. Using the old process, it took 15 hours to make a unit. If the process makes one unit each hour on average and each unit is worth $1,500, what is the reduction in work-in-process value?

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  1. 7 December, 13:29
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    Reduction in work in progress = $7500

    Explanation:

    given data

    time = 10 hours

    time = 15 hours

    worth = $1,500

    to find out

    reduction in work in process value

    solution

    we find work in progress by this formula

    work in progress = Flow rate * Cycle Time ... 1

    so Initial work in progress is

    Initial work in progress = (1 per hour) * 10 hours = 10

    and Final work in progress is here

    Final work in progress = (1 per hour) * 15 hours = 15

    so

    Initial work in progress value = 10 * 1500

    Initial work in progress value = $15000

    and

    Final work in progress value = 15 * 1500

    Final work in progress value = $22500

    so

    Reduction in work in progress = $22500 - $15000

    Reduction in work in progress = $7500
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