Alton Inc. is working at full production capacity producing 32,000 units of a un

Question

Alton Inc. is working at full production capacity producing 32,000 units of a unique product. Manufacturing costs per unit for the product are

     The unit manufacturing overhead cost is based on a $4 variable cost per unit and $192,000 fixed costs. The nonmanufacturing costs, all variable, are $8 per unit, and the sales price is $45 per unit.

     Sports Headquarters Company (SHC) has asked Alton to produce 6,400 units of a modification of the new product. This modification would require the same manufacturing processes. SHC has offered to share the nonmanufacturing costs equally with Alton. Alton would sell the modified product to SHC for $30 per unit.

Should Alton produce the special order for SHC?

Suppose that Alton Inc. had been working at less than full capacity to produce 26,800 units of the product when SHC made the offer. What is the minimum price that Alton should accept for the modified product under these conditions?

Alton Inc. is working at full production capacity producing 32,000 units of a unique product. Manufacturing costs per unit for the product are

Explanation / Answer

Full capacity 32000 DM 9 DL 8 Man overheads 10 total Man cost 27 Manu overheads Variable 4 Fixed cost 192000 units 32000 Per unit FC 6 Total Man overheads 10 Non Manyu overheads 8 Selling price 45 Total cost DM 9 DL 8 Man overheads 10 Non Manyu overheads 8 Total cost per unit 35 1b) DM 9 DL 8 Man overheads 10 Non Manyu overheads 4 Total unit cost 31 SP offered 30 it should not sell as the SP is less than the total cost, it can consider selling only if it has idle capacity , and it doesnot increases in FC 2) DM 9 DL 8 Variable Man oveheads 4 Non man overheads 4 Minimum price 25

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