The Mountain Lion Corporation is working at full production capacity producing 13,000 units of a unique...
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The Mountain Lion Corporation is working at full production capacity producing 13,000 units of a unique product, Everlast. Manufacturing cost per unit for Everlast is as follows: (Click the icon to view the cost per unit information.) A customer, the Apex Company, has asked Mountain Lion to produce 2,500 units of Stronglast, a modification of Everlast. Stronglast would require the same manufacturing processes as Everlast. Apex has offered to pay Mountain Lion $47 for a unit of Stronglast plus half of the marketing cost per unit. Read the requirements. Requirement 1. What is the opportunity cost to Mountain Lion of producing the 2,500 units of Stronglast? (Assume that no overtime is worked.) The opportunity cost is Data Table Direct materials Direct manufacturing labor Manufacturing overhead Total manufacturing cost $ 7 4 15 $ 26 Manufacturing overhead cost per unit is based on variable cost per unit of $5 and fixed costs of $130,000 (at full capacity of 13,000 units). Marketing cost per unit, all variable, is $6, and the selling price is $52. Requirements 1. What is the opportunity cost to Mountain Lion of producing the 2,500 units of Stronglast? (Assume that no overtime is worked.) 2. The Chesapeake Corporation has offered to produce 2,500 units of Everlast for Mountain Lion so that Mountain Lion may accept the Apex offer. That is, if Mountain Lion accepts the Chesapeake offer, Mountain Lion would manufacture 10,500 units of Everlast and 2,500 units of Stronglast and purchase 2,500 units of Everlast from Chesapeake. Chesapeake would charge Mountain Lion $45 per unit to manufacture Everlast. On the basis of financial considerations alone, should Mountain Lion accept the Chesapeake offer? Show your calculations. 3. Suppose Mountain Lion had been working at less than full capacity, producing 10,500 units of Everlast, at the time the Apex offer was made. Calculate the minimum price Mountain Lion should accept for Stronglast under these conditions. (Ignore the previous $47 selling price.) The Mountain Lion Corporation is working at full production capacity producing 13,000 units of a unique product, Everlast. Manufacturing cost per unit for Everlast is as follows: (Click the icon to view the cost per unit information.) A customer, the Apex Company, has asked Mountain Lion to produce 2,500 units of Stronglast, a modification of Everlast. Stronglast would require the same manufacturing processes as Everlast. Apex has offered to pay Mountain Lion $47 for a unit of Stronglast plus half of the marketing cost per unit. Read the requirements. Requirement 1. What is the opportunity cost to Mountain Lion of producing the 2,500 units of Stronglast? (Assume that no overtime is worked.) The opportunity cost is Data Table Direct materials Direct manufacturing labor Manufacturing overhead Total manufacturing cost $ 7 4 15 $ 26 Manufacturing overhead cost per unit is based on variable cost per unit of $5 and fixed costs of $130,000 (at full capacity of 13,000 units). Marketing cost per unit, all variable, is $6, and the selling price is $52. Requirements 1. What is the opportunity cost to Mountain Lion of producing the 2,500 units of Stronglast? (Assume that no overtime is worked.) 2. The Chesapeake Corporation has offered to produce 2,500 units of Everlast for Mountain Lion so that Mountain Lion may accept the Apex offer. That is, if Mountain Lion accepts the Chesapeake offer, Mountain Lion would manufacture 10,500 units of Everlast and 2,500 units of Stronglast and purchase 2,500 units of Everlast from Chesapeake. Chesapeake would charge Mountain Lion $45 per unit to manufacture Everlast. On the basis of financial considerations alone, should Mountain Lion accept the Chesapeake offer? Show your calculations. 3. Suppose Mountain Lion had been working at less than full capacity, producing 10,500 units of Everlast, at the time the Apex offer was made. Calculate the minimum price Mountain Lion should accept for Stronglast under these conditions. (Ignore the previous $47 selling price.)
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Answer 1 The opportunity cost to Mountain Lion of producing the 2500 units of Stronglast can be calculated by comparing the total manufacturing cost of Stronglast with the selling price of Everlast Gi... View the full answer
Related Book For
Cost Accounting A Managerial Emphasis
ISBN: 978-0133428704
15th edition
Authors: Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan
Posted Date:
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