Question
Alton Inc. is working at full production capacity producing 39,000 units of a unique product. Manufacturing costs per unit for the product are as follows:
Alton Inc. is working at full production capacity producing 39,000 units of a unique product. Manufacturing costs per unit for the product are as follows:
Direct materials | $ | 10 | |
Direct labor | 9 | ||
Manufacturing overhead | 11 | ||
Total manufacturing cost per unit | $ | 30 | |
The per-unit manufacturing overhead cost is based on a $5 variable cost per unit and $234,000 fixed costs. The nonmanufacturing costs, all variable, are $10 per unit, and the sales price is $67 per unit.
Sports Headquarters Company (SHC) has asked Alton to produce 6,600 units of a modification of the new product. This modification would require the same manufacturing processes. However, because of the nature of the proposed sale, the estimated nonmanufacturing costs per unit are only $5 (not $10). Alton would sell the modified product to SHC for $52 per unit.
Required
1-a. Calculate the contribution margin for 6,600 units for both the current and special order.
1-b. Should Alton produce the special order for SHC?
2. Suppose that Alton Inc. had been working at less than full capacity to produce 33,100 units of the product when SHC made the offer. What is the minimum price per unit that Alton should accept for the modified product under these conditions?
Complete this question by entering your answers in the tabs below. Ref 14 Req 18 Req2 Calculate the contribution margin for 6,600 units for both the current and special order. Contribution Special Req1A Reg 18 ) Complete this question by entering your answers in the tabs below. Regia Re:D Reg2 Should Albon produce the special order for SHIC? Complete this question by entering your answers in the tabs below. ROLA Reg 10 Rag 2 Suppose that Alton Inc. had been working at less than full capacity to produce 33,100 units of the product when SHC made the offer. What is the minimum price per unit that Alon should accept for the modified product under conditions? (Round your answer to 2 decimal places)
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