As a homework, please solve the followin problems:

1

Fulcrum Co. is currently producing 20,000 components at a cost of $16 per unit. An outside supplier has offered to sell 20,000 units to Fulcrum Co. for $14 a unit. The production costs are shown below:

Per Unit

Direct materials $ 2

Direct Labor 4

Variable overhead 5

Fixed overhead (40% avoidable) 5

$ 16

A Should Fulcrum make or buy the component?

B. Assume the space used to produce the component could be leased to another company for $40,000. What decision should be made?

2.

LDR Manufacturing is considering the production of a new laser disk reader. Estimated unit variable costs are $60, and annual fixed costs would be $120,000. The unit price would be equal to cost plus a 25% markup.

a. What would the full cost per unit and the unit sales price be if sales are assumed to be 1,000 units?

b. Assume sales are only 800 units. What are the full unit cost and unit sales price?

c. Discuss the problem created with the decrease in estimated demand.