Greene Industries maufactures widgets which they sell to retail stores. Their fa
ID: 2558153 • Letter: G
Question
Greene Industries maufactures widgets which they sell to retail stores. Their factory can produce up to 2,500,000 widgets per year at a selling price of $144.95. Cost per widget is as follows Quanitity Used per Unit Cost per kg/hr Description Raw Materials (kg) Direct Manufacturing Labour (hr) Variable Overhead (per DML hour) Fixed Overhead (per DML hour) 3.3 11.91 18.25 6.00 5.00 NOTE: when calculating amounts ROUND al numbers (intermediate and final) to two decimal places. For instance, if the total raw material costs are 3.375, round to 3.38 before using the amount to calculate total cost per widget. Required: Bleaue Inc. has asked Greene to manufacturer a more basic version of their widget. This version, which would be produced only for Bleaue Inc., would save Greene 0.50 kg on their raw materials usage but would require an additional 0.25 hours of direct manufacturing labour. Bleaue Inc. requires 409,849 widgets and has offered a special price of $91.93 per unit. Remember to enter your answers without symbols or commas. Round your number to two decimal places. If NOTE: if your answer is $22,529.2851, enter 22529.29 your answer is $53,789.00 then enter 53789.00 1. If Greene Industries were to accept this order by how much would their operating income change? If operating income would DECREASE enter the number with a -'preceeding it. Greene's operating income would change by a total of $ 2. What is the minimum selling price that Greene Industries should demand from Bleaue Inc. in order to accept the order? The minimum selling price that Greene Industries should demand is S per unit.Explanation / Answer
Answer
Qty used per unit
Cost per Kg/Hr
Cost per widgets
Raw materials - kg
2.8
$11.91
$33.35
Direct manufacturing labor - hr
1.95
$18.25
$35.59
Variable Overhead - per DML hour
1.95
$6
$11.7
Total Variable cost if produced for Bleaue Inc.
$80.64
If Sold to Bleaue Inc
Sale price per Widget
$91.93
(-) Applicable Variable cost per widget
$80.64
Contribution per widget
$11.29
Total widget considered for Offer
409,849
Greene's Operating Income would change by total of
$4,627,195.21
Minimum price per widget should be equal to variable cost per widget if there is enough widget left for offer to be fulfilled after selling to outside.
Minimum Selling Price that can be demanded = Variable cost per widget
Material cost
$33.35
Labor Cost
$35.59
Variable Overhead cost
$11.7
Total Minimum Selling Price per widget
$80.64
Qty used per unit
Cost per Kg/Hr
Cost per widgets
Raw materials - kg
2.8
$11.91
$33.35
Direct manufacturing labor - hr
1.95
$18.25
$35.59
Variable Overhead - per DML hour
1.95
$6
$11.7
Total Variable cost if produced for Bleaue Inc.
$80.64
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