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1 Ovation Company has a single product called a Bit. The company normally produces and sets 67.200 Bts each year at seling of $48 per

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1 Ovation Company has a single product called a Bit. The company normally produces and sets 67.200 Bts each year at seling of $48 per unit. The company's unit costs at this level of activity are given below Direct materials Direct Labour Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Fixed selling expenses Total cost per unit $10.20 7.80 3.90 2.70 (5181,440 total) 3.30 (5221.760 total) 6.90 A number of questions relating to the production and sale of bits follow. Each question is independent Required 1. Assume that Ovation Company has sufficient capacity to produce 100,800 Bis each year without any increase in foed manufacturing overhead costs. The company could increase its sales by 25% above the current 67,200 units each year if it were Willing to increase the fixed selling expenses by $100.000 a. Calculate the incremental net operating income. Answer is complete and correct. Incremental operating income $ 254,500 b. Would the increased fixed selling expenses be justified? Yes 12 Doints No 2. Assume again that Ovation Company has sufficient capacity to produce 100,800 Bits each year. A customer in a foreign market wants to purchase 16,800 Bits. Import duties on the Bits would be $170 per unit, and costs for permits and licences would be $7.560 Both Import duties and permits and licenses will be paid by Ovation. The only selling costs that would be associated with the order are $3,30 per unit shipping cost. Compute the der unit break-even price on this order. (Do not round your intermediate calculations Round your answer to 2 decimal places.) Answer is complete but not entirely correct Brokerio per un 3. The company has 1000 Bits on hand that have some irregularities and are therefore considered to be "seconds. Due to the irregularities, it will be impossible to sell these units at the normal price through regular distribution channels. What unit cost figure is relevant for setting a minimum selling price? (Round your answer to 2 decimal places) Answer is complete and correct. 56.90 la completion 1 1 12 Doin 4. Due to a strike in its supplier's plantOvation Company is unable to purchase more material for the production of Bts. The strikes expected to last for two months Ovation Company has enough material on hand to operate 30% of covers for the two month period. As an alternative, Ovation could close its plant down entirely for the two months, the plant were closed, fed manding overhead costs would continue at 60% of the normal level during the two month period and the feed selling expenses would be reduced by 20%. What would be the impact on profits of closing the plant for the two month period? input the amounts positive value. Do not round your intermediate calculations.) Answer is complete and correct. of doing e Net Geadvantage 5. An outside manufacturer has offered to produce Bits and ship them directly to Ovation's customers. Ovation Company at this offer, the facilities that it uses to produce Bits would be ide, however, fived manufacturing overhead costs would be reduced by 70%. Since the outside manufacturer would pay for all shipping costs, the variable selling expenses would be only two thirds of current amount Compute the unit cost that is relevant for comparison to the price quoted by the outside manufacturer (Do not roond your intermediate calculations. Round your answer to 2 decimal places) Total vode untos

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