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Q2. NC and DNC Lathe Problem (Crossover)

You are a cost accountant. Your company is considering making a gear that sells for $150 each. The gear could be made on an NC lathe for $75 or...

Answer :

Numerical Control (NC) and Direct Numerical Control (DNC) lathe machines are used to machine precision parts. As a cost accountant, you must determine the best choice for your business.

If your company intends to manufacture a gear that sells for $150 per unit, it is necessary to compare the cost of producing the part on an NC lathe ($75) to the cost of producing the part using an alternative method. If the cost of producing the part with the alternative method is less than the cost of producing the part on an NC lathe, the company should consider switching to the alternative method. As a cost accountant, you must decide if the $75 cost of producing the gear on an NC lathe is competitive compared to the cost of producing the gear on a different machine, especially if the sales price is $150. If you can produce the gear with a lower cost and still keep the quality of the product then it would be a better choice. Also, you must determine the volume of gears to be produced, and the availability of an NC lathe or another machine for manufacturing the gears to meet the demand. The best decision will depend on your analysis of costs, volume, and availability.

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