Posted: August 9th, 2016

What is the cost of portable phones?

Portable Phones, Inc. manufactures and sells wireless telephones for residential and commercial use. Portable Phones’ plant is organized by product line, with five phone assembly departments in total. Each of these five phone assembly departments is responsible for the complete production of a particular phone line, including manufacturing some parts, purchasing other parts, and assembling the unit. Each of the five phone assembly department manager reports to a product-line manager, who then has to profit responsibility for his/her product. These five product-line managers have authority over pricing, marketing, distribution, and production of their product. Each of the five phone assembly departments is a cost center within its respective product-line profit center.
A key component of each phone is the circuit board(s) containing the integrated circuit chips. Each phone assembly department purchases from outside vendors the basic boards and chips to be attached to its board(s).