3. Nichols Company, which manufactures a single product, is operating at full capacity of 20,000 units per month. The follow unit costs relate to the manufacture of this product: Manufacturing Direct materials Direct labor Variable overhead Fixed overhead ew $2.00 4.00 1.00 1.80 Selling and administrative: Variable Fixed 3.00 1.20 The company has 100 units left over from last year which have small defects and which will have to be sold at a reduced price as scrap. This would have no effect on the company's other sales. The variable selling and administrative costs would have to be incurred to sell the defective units. What cost is relevant as a guide for setting a minimum price on these defective units? Thurston Company sels its prodtuct for $42 per unit. The compan full capacity of 400,000 units is as follows. based on the y's unit product cost 4. $ 8 10 12 S30 Direct materials Direct labor Manufacturing overhead Unit product cost A special order offering to buy 40,000 units has been received from a foreign distributor. The only selling costs that would be incurred on this order would be $6 per unit for shipping. The company has sufficient idle capacity to manufacture the additional units. Two-thirds of the manufacturing overhead is fixed and would not be affected by this order. Assume that direct labor is an avoidable cost in this decision. In negotiating a price for the special order, what is the minimum acceptable selling price per unit? 5. Sandstrom Company is a small family business that produces woo Plaques Trophies Selling price per unit Variable cost per unit Contribution margin per unit $18 12 s6 $15 33% th Contribution margin ratio ues and trophies. Generally, the wood required for each plaque takes 0.25 hour to sand, while the word required for each trophy takes 0.50 hour to sand. Based on the constraint related to the machine time, which product should be emphasized if only limited machine time is available? The management of Bayside Company is considering whether one of the department's in its retail stores should be eliminated. The contribution margin in the department is $150,000 per year. Fixed expenses allocated to the department are $130,000 per year. It is estimated that $120,000 of these fixed expenses will be eliminated if the department is discontinued. 2. Part (a) Which costs are irrelevant to this decision? Part (b) If the department is eliminated, what will be the impact on the company's overall net operating income