Cheyenne Contractors makes fixtures for aircraft fueling and hydraulic systems. As a supplier to the aircraft industry, the annual volumes can vary greatly depending on both civilian and military activity. Managers at Cheyenne have developed certain procedures as a part of their riskmanagement strategy. One of those procedures is to forecast financial results based on the possible range of production and sales for the year.

As the company’s senior cost analyst, it is your responsibility to provide these forecasts. As a first step, you have collected the following information about the individual cost components:

Cheyenne Contractors produces to order, and for the purpose of this assignment, you can assume it has no inventories. Capacity constraints require a second shift for any production over 35,000 units. Cheyenne uses an average revenue of $312 per unit for forecasting purposes. 

Required

Compute the cost per unit and the gross margin per unit assuming output and sales of

a. 25,000 units.

b. 45,000 units.

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1 4 5 6 7 8 9 10 11 12 13 CEE 25555 = 14 15 16 17 18 19 20 21 22 23 24 25 A Cost Category Direct costs: Materials Labor Overhead: Indirect plant labor Indirect plant supplies Machine leases Overtime Plant depreciation Plant maintenance Plant supervision B Cost Plant utilities Variable Variable Variable Variable Step Semivariable Fixed Step Step Fixed Miscellaneous overhead Fixed $52 per unit. $25 per unit. $60 per unit. $14 per unit.. Cost Information $698,000 per year if production is below 35,000 units; otherwise, total lease costs are $1,233,000. $0 for any production up to 30,000 units; $15 per unit for any additional production. $122,000 per year. $210,000 per shift. $200,000 per shift. There is also a shift differential of $50,000, additional compensation for supervisors on a second shift. $190,000 per year. $105,000 per year.