Sutherland manufactures and sells 110,000 laser printers each month. A principal
ID: 2351476 • Letter: S
Question
Sutherland manufactures and sells 110,000 laser printers each month. A principal component part in each printer is its paper feed drive. Sutherland's plant currently has the monthly capacity to produce 150,000 drives. The unit costs of manufacturing these drives (up to 150,000 per month) are as follows:
Variable costs per unit:
Direct materials $ 45
Direct labor 25
Variable manufacturing overhead 5
Fixed costs per month:
Fixed manufacturing overhead $ 1,430,000
Desk-Mate Printers has offered to buy 20,000 paper feed drives from Sutherland to be used in its own printers.
a.
Compute the average unit cost of manufacturing each paper feed drive assuming that Sutherland manufactures only enough drives for its own laser printers. (Omit the "$" sign in your response.)
Average per-unit manufacturing cost $
b.
Compute the incremental unit cost of producing an additional paper feed drive. (Omit the "$" sign in your response.)
Incremental unit cost $
c.
Compute the per-unit sales price that Sutherland should charge Desk-Mate to earn $500,000 in monthly pretax profit on the sale of drives to Desk-Mate. (Omit the "$" sign in your response.)
Unit sales price $
Explanation / Answer
a) Cost is 1430000 + (45+25+5)110000 Average Cost is Cost/110000 = (1430000 + (45+25+5)110000)/110000 = 13 + 45+25+5 = 88 b)The incremental cost is simply the variable cost, 45+25+5 = 75 c) We can sell them 20,000 units, so we must make 500000/20000 = 25 dollars per unit. Our variable cost is 75, so we must price them at 75 + 25 = 100
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.