SungSam, Inc. is designing a new digital camcorder that is projected to have the

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SungSam, Inc. is designing a new digital camcorder that is projected to have the following per-unit costs to manufacture: Cost Categories                       Unit Costs Materials costs                           $112 Labor costs                                   85 Overhead costs                            213                        Total unit cost    $410 SungSam adds 30% to its manufacturing cost for corporate profit. a. What unit profit would SungSam realize on each camcorder? b. What is the overall cost to produce a batch of 10,00 camcorders? c. What would SungSam's profit be on the batch of 10,000 camcorders if historical data show that 1% of product will be scrapped in manufacturing, 3% of finished product will go unsold, and 2% of sold product will be returned for refund? d. How much can SungSam afford to pay for a contract that would lock in a 50% reduction in the unit material cost previously given? If SungSam does sign the contract, the sales price will not change. I think I have done a-c correctly, however, I would appreciate seeing how you got your answer but I really need help with part d as I don't really understand what the question is asking. Thanks! SungSam, Inc. is designing a new digital camcorder that is projected to have the following per-unit costs to manufacture: Cost Categories                       Unit Costs Materials costs                           $112 Labor costs                                   85 Overhead costs                            213                        Total unit cost    $410 SungSam adds 30% to its manufacturing cost for corporate profit. a. What unit profit would SungSam realize on each camcorder? b. What is the overall cost to produce a batch of 10,00 camcorders? c. What would SungSam's profit be on the batch of 10,000 camcorders if historical data show that 1% of product will be scrapped in manufacturing, 3% of finished product will go unsold, and 2% of sold product will be returned for refund? d. How much can SungSam afford to pay for a contract that would lock in a 50% reduction in the unit material cost previously given? If SungSam does sign the contract, the sales price will not change. I think I have done a-c correctly, however, I would appreciate seeing how you got your answer but I really need help with part d as I don't really understand what the question is asking. Thanks! Materials costs                           $112 Labor costs                                   85 Overhead costs                            213                        Total unit cost    $410 SungSam adds 30% to its manufacturing cost for corporate profit. a. What unit profit would SungSam realize on each camcorder? b. What is the overall cost to produce a batch of 10,00 camcorders? c. What would SungSam's profit be on the batch of 10,000 camcorders if historical data show that 1% of product will be scrapped in manufacturing, 3% of finished product will go unsold, and 2% of sold product will be returned for refund? d. How much can SungSam afford to pay for a contract that would lock in a 50% reduction in the unit material cost previously given? If SungSam does sign the contract, the sales price will not change. I think I have done a-c correctly, however, I would appreciate seeing how you got your answer but I really need help with part d as I don't really understand what the question is asking. Thanks!

Explanation / Answer

On d). If unit cost is $410 and the company adds 30% for profit its price would be $410* 1.3= $533. If it keeps its price the same and gets a 50% reduction in unit material cost it would save $112* .5= $56 per item. Over 10,000 items it would save $560,000, so it could pay up to $560,000 for this contract.

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