Manufacturer XYZ has two production divisions, Processing (P) and Assembly (A).

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2. (20 points) Manufacturer XYZ has two production divisions, Processing (P) and Assembly

(A). The company has three service departments, facility management (FM), receiving and 

handling (RH), and human resource (HR). Work at Processing heavily relies on labor force. 

Its costs depend primarily on the direct-labor hours. On the other hand, work at Assembly is 

highly automated and its costs can be mainly determined by the number of components used 

in each product. The costs of facility management depend primarily on the space used. The 

costs of receiving and handling depend primarily on the number of components handled. The 

costs of human resource depend primarily on the labor hours.

Two products, Pp1 and Pp2, are produced at Processing. Another two products, Pa1 and Pa2, are 

produced at Assembly. The material costs, number of components and labor hours used are 

listed in the table below.


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