Ess Essential Company normally produces and sells 4,000 video monitors for perso

Question

Ess 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 $_________________________.

Please show ALL WORK FOR ANSWERS.

Explanation / Answer

a b variable cost in manufacturing 4000 units = 4000*62 = 248000 variable cost in manufacturing 4000 units = 5000*62 = 310000 Fixed cost 170000 Fixed cost 170000 total cost 418000 total cost 480000 Average cost 418000/4000 104.5 Average cost 480000/5000 96 c Selling price in case of spl order 70 less: V.C 62 Contribution 8 no. of units of slp order 10000 net benefit (increase) 80000 Note : fixed cost is here irrelevant hence it is ignored

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.