MC Qu73 Lattimer Company had the following results Lattimer Company had the foll

Question

MC Qu73 Lattimer Company had the following results Lattimer Company had the following results of operations for the past year s 183,750 Sales (15,000 units at $12.25) Variable manufacturing costs Fixed nanafacturing costs Selling and administrative expenses (all tixed) Operating incone $101,250 24,750 39,750 (165,750) 400 $ 18,000 A foreign company whose sales will not affect Lattimer's market offers to buy 5,500 units at $8.00 per unit In addition to existing costs, selling these units would add a $0.30 seling cost for export fees Lattimer's annual production capacity is 25,000 units. Lattimer accepts this addsional business, the special crder will yield a Multiple Choice $5.225 prof 6 875 pro MacBook Air 4 ZXC command command option

Explanation / Answer

Select option - 1 ................ 5225 as correct answer

Firstly we need to check the availability of spare capacity. Here total capacity is 25000 units and 15000 is currently utilized, so there is 10000 units spare capacity which is sufficient to consider the 5500 units of export offer.

Offered selling price = $ 8.00 per unit.

Variable manufacturing cost = 101,250 / 15000 = 6.75 per unit.

Additional cost for export = 0.30 per unit

So total relevant cost if the offer is accepted = 6.75 + 0.30 = 7.05 per unit.

Thus profit per unit = 8 - 7.05 = 0.95

Total profit = 0.95 * 5500 units = 5225..................final answer

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