Alton Inc. is working at full production capacity producing 34,000 units of a unique product. Manufacturing...

Alton Inc. is working at full production capacity producing 34,000 units of a unique product. Manufacturing costs per unit for the product are as follows:


Direct materials	$	10
Direct labor		9
Manufacturing overhead		11
Total manufacturing cost per unit	$	30

The per-unit manufacturing overhead cost is based on a $6 variable cost per unit and $170,000 fixed costs. The nonmanufacturing costs, all variable, are $8 per unit, and the sales price is $55 per unit.

Sports Headquarters Company (SHC) has asked Alton to produce 6,000 units of a modification of the new product. This modification would require the same manufacturing processes. However, because of the nature of the proposed sale, the estimated nonmanufacturing costs per unit are only $4 (not $8). Alton would sell the modified product to SHC for $40 per unit.

Required

1-a. Calculate the contribution margin for 6,000 units for both the current and special order.

1-b. Should Alton produce the special order for SHC?

2. Suppose that Alton Inc. had been working at less than full capacity to produce 28,600 units of the product when SHC made the offer. What is the minimum price per unit that Alton should accept for the modified product under these conditions?

Required 1a

	Contribution Margin
Current
Special order

Required 1b

Should Alton produce the special order for SHC?

Required 2

Minimum price $

Expert Solution

ekkarill92 answered 2 years ago

Alton Inc. is working at full production capacity producing 23,000 units of a unique product. Manufacturing...

Alton Inc. is working at full production capacity producing 23,000 units of a unique product. Manufacturing costs per unit for the product are as follows: Direct materials $ 8 Direct labor 7 Manufacturing overhead 9 Total manufacturing cost per unit $ 24 The per-unit manufacturing overhead cost is based on a $5 variable cost per unit and $92,000 fixed costs. The nonmanufacturing costs, all variable, are $10 per unit, and the sales price is $44 per unit. Sports Headquarters Company...

Alton Inc. is working at full production capacity producing 31,000 units of a unique product. Manufacturing...

Alton Inc. is working at full production capacity producing 31,000 units of a unique product. Manufacturing costs per unit for the product are as follows: Direct materials $ 7 Direct labor 6 Manufacturing overhead 8 Total manufacturing cost per unit $ 21 The per-unit manufacturing overhead cost is based on a $3 variable cost per unit and $155,000 fixed costs. The nonmanufacturing costs, all variable, are $10 per unit, and the sales price is $38 per unit. Sports Headquarters Company...

Alton Inc. is working at full production capacity producing 26,000 units of a unique product. Manufacturing...

Alton Inc. is working at full production capacity producing 26,000 units of a unique product. Manufacturing costs per unit for the product are as follows: Direct materials $ 10 Direct labor 9 Manufacturing overhead 11 Total manufacturing cost per unit $ 30 The per-unit manufacturing overhead cost is based on a $5 variable cost per unit and $156,000 fixed costs. The nonmanufacturing costs, all variable, are $8 per unit, and the sales price is $45 per unit. Sports Headquarters Company...

Toys for fun Co. is working at full production capacity producing 20,000 units of a unique...

Toys for fun Co. is working at full production capacity producing 20,000 units of a unique product, OB1. Sale price and costs per unit for OB1 are as follows: Sale price $ 40 Direct materials $ 5 Direct manufacturing labour $ 8 Manufacturing overhead $ 14 Selling costs (all variable) $ 8 The unit manufacturing overhead cost is based on a variable cost per unit of $10 and fixed costs of $80,000 (at full capacity of...

Problem 2 The POW Corporation is working at full production capacity producing 15,000 units of a...

Problem 2 The POW Corporation is working at full production capacity producing 15,000 units of a unique product, Alpha. Manufacturing cost per unit for Alpha is: Direct materials Variable direct manufacturing labor Manufacturing overhead Total Manufacturing cost $15 3 18 $36 Manufacturing overhead cost per unit is based on variable cost per unit of $8 and fixed costs of $150,000 (at full capacity of 15,000 units). Marketing cost per unit, all variable, is $6, and the selling price is $72....

Anas Company engaged in manufacturing plastic products is working at 60% capacity and produces 5,400 units...

Anas Company engaged in manufacturing plastic products is working at 60% capacity and produces 5,400 units per month. The present cost breaks up for one unit is as under: Material SR 8; Labor- SR 2; Overhead-SR 6 (25% fixed) The selling price is SR 25 per unit. If it is desired to work the company at 70% capacity the selling price falls by 4%. At 80% capacity the selling price increase by 2%. You are required to prepare a statement showing...

QUESTION 42 Wheel Company makes a product, K9. It has a production capacity of 1,000 units,...

QUESTION 42 Wheel Company makes a product, K9. It has a production capacity of 1,000 units, and it can sell 900 units in the regular market. The regular selling price is $60 each. Wheel has received a request from Tom for a special order of 100 units of K9. This special order does not incur any variable selling cost. The following is the per-unit cost information: Variable manufacturing $18 Fixed manufacturing $20* Unit manufacturing cost $38 Variable selling $4 Fixed selling...

Tommy Company makes a product, X-10. It has a production capacity of 10,000 units. The regular...

Tommy Company makes a product, X-10. It has a production capacity of 10,000 units. The regular selling price is $135 each. Tommy has received a request from Chully for a special order of 1,000 units of X-10. Only for this order, no variable selling cost would be incurred. The following is the per-unit cost information: Direct materials (Variable) $10 Direct labor (Variable) $35 Variable overhead $25 Fixed overhead $30* Unit product cost $100 Variable selling $6 Fixed selling...

A production department in a process manufacturing system completed its work on 74,000 units of product...

A production department in a process manufacturing system completed its work on 74,000 units of product and transferred them to the next department during a recent period. Of these units, 29,600 were in process at the beginning of the period. The other 44,400 units were started and completed during the period. At period-end, 17,200 units were in process. Equivalent Units of Production (EUP)—Weighted Average Method 1. All direct materials are added to products when processing begins. Units % Materials EUP—Materials...

Last year Terrific Inc sold 1000 units of a product while operating at 80% of capacity....

Last year Terrific Inc sold 1000 units of a product while operating at 80% of capacity. The selling price per unit was $340 and variable cost was $190 per unit. Fixed costs were $150,000. (a) At what level of sales expressed in dollars does the firm achieve break-even? (b) What is the expected prorit in dollars if the firm operates at full capacity?

Question