Garrett\'s Glassworks makes glass flanges for scientfic use. Materials cost S1 p
ID: 2338532 • Letter: G
Question
Garrett's Glassworks makes glass flanges for scientfic use. Materials cost S1 per flange, and the glass blowers are paid a wage rate of $20 per hour. A glass blower blows 10 flanges per hour. Fixed manufacturing costs for flanges are S20,000 per period. Period (nonmanufacturing) costs associated with flanges are $10,000 per pericd and are fixed. Read the requirements. Foed costs Fixed costs costs costs coste Fixed costs Number of flangos Number of fanges Fixed costs costs Number of flanges Number of flanges Requirement 2. Assume Garret's Glassworks manufactures and sells 5,000 flanges this period. Their competitor, Flora's Flasks, sells flanges for $8.00 each. Can Garrett sell below Flora's price and still make a profit on the flanges? (Round the total cost per unit to two decimal places.) Begin by determining the formula used to calculate the total cost per unit Total cost per unit The total cost per unit when manufacturing 5,000 flanges is $:therefore, they sell below Flora's price and still make a profit. Requirement 3. How would your answer to requirement 2 differ if Garretts Glassworks made and sold 12,000 flanges this period? Why? What does this indicate about the use of unit cost in decision making? (Round the total cost per unit to two decimal places.) The total cost per unit when manufacturing 12,000 flanges would be $ With production and sales at this level, the company I make a profit ifthe selling price is below $8.00 each. Managers must be cautious using unit costs for decision making because remain the same regardless of the number of units produced.Explanation / Answer
2 Total cost per unit=(Variable cost+Fixed cost)/Number of units produced Variable cost: $ Material 1 Labor (20/10) 2 Total 3 * Flanges produced 5000 Total variable cost 15000 Total cost per unit=(15000+20000)/5000=$ 7 Total cost per unit when manufacturing 5000 flangers is $ 7; therefore they can sell below flora's price and still make a profit. 3 Total cost per unit=(Variable cost+Fixed cost)/Number of units produced Variable cost: $ Material 1 Labor (20/10) 2 Total 3 * Flanges produced 12000 Total variable cost 36000 Total cost per unit=(36000+20000)/12000=$ 4.67 Total cost per unit when manufacturing 12000 flangers would be $ 4.67 With production and sales at this level, the company can make profit if the selling price is below $8 each.Managers must be cautious using unit costs for decision making because Fixed cost remain the same regardless of the number of units produced
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