Assignment Material

$2-21$ Total and unit costs, decision making. $($LO $3,4,5)$ Graham's Glassworks makes glass flanges for scientific use. Materials cost $$1$ per flange, and the glass blowers are paid a wage rate of $$20$ per hour. A glass blower blows $10$ flanges per hour. Fixed manufacturing costs for flanges are $$20,000$ per period. Period $($non$-$manufacturing$)$ costs associated with flanges are $$10,000$ per period and are fixed.

Required

Fred's Flasks sells flanges for $$8\mathrm{.}25$ each. Can Graham sell below Fred's price and still make a profit on the flanges? Assume Graham produces and sells $5,000$ flanges this period.

How would your answer to requirement $2$ differ if Graham's Glassworks made and sold $10,000$ flanges this period? Why? What does this indicate about the use of unit cost in decision making?

Check Figure: $1.$ The variable direct manufacturing unit cost, $$\frac{3}{?}$ flange