Princeton Manufacturing Company summarizes the following total cost data for the month of March. Princeton has a normal capacity per month of 25,000 units of product that sell for \($40\) each. For the foreseeable future, sales volume should equal normal capacity of production.

1.  Beyond normal capacity, fixed overhead cost increases \($6,350\) for each 1,000 units or fraction thereof until a maximum capacity of 30,000 units is reached.

2. Selling expenses are a 5% sales commission plus shipping costs of \($1.20\) per unit.

Required

a. Using the information available, prepare a formula to estimate Princeton’s total cost at various production volumes up to normal capacity.

b. Prove your answer in requirement (a) relative to the total cost figure for 25,000 units.

c. Calculate the planned total cost at 20,000 units, and explain why total cost did not decrease in proportion to the reduced volume.

d. If Princeton were operating at normal capacity and accepted an order for 500 more units, what would it have to charge for the order to earn a net income before income tax of \($8\) per unit on the new sale?

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Direct material Direct labor.. Variable overhead. Fixed overhead (Note 1). $295,000 165,000 85,000 140,000 Selling expense (Note 2). 80,000 Administrative expense (fixed).. 56,000 $821,000