1. Essential Company normally produces and sells 4,000 video monitors for person
ID: 2376677 • Letter: 1
Question
1. Essential Company normally produces and sells 4,000 video monitors for personal computers each month. Variable manufacturing costs amount to $62 per unit, and fixed manufacturing costs are $170,000 per month. The regular sales price of the monitors is $140 per unit. The company is considering a special order from a foreign computer maker to buy an additional 1,000 monitors per month at a special price of $70 per unit. Filling this special order would not affect Essential Company's regular sales volume or fixed manufacturing costs.
(a) The average cost per unit at the 4,000-unit-per-month production level is:
$_________________________.
(b) The average cost per unit at the 5,000-unit-per-month production level is:
$_________________________.
(c) The amount of increase or decrease (indicate the correct term) in Essential Company's operating income that would result from accepting the special order is $_________________________.
Explanation / Answer
(a) The average cost per unit at the 4,000-unit-per-month production level is:
$______104.50___________________.
(b) The average cost per unit at the 5,000-unit-per-month production level is:
$_______96.00__________________.
(c) The amount of increase or decrease (indicate the correct term) in Essential Company's operating income that would result from accepting the special order is $___8000___________.
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