B C D 12,000,000 12018 ww 100,000 50,000 150,000 Bio&Tech has recently invented a patented new mask, K-19, against Corona Virus. Bio&Tech has a plant with capacity to produce 10,000 units of K-19 per month. The plant cost $12 million and has a 10 year life. Bio&Tech employs a straight line depreciation method. Bio&Tech has a variable cost of $3 per unit. Fixed costs ar $50,000 per month for such costs as plant management, taxes and security. Plant depreciation is 5 not included in the $50,000 fixed cost. 6 The following Table summarizes the cost structure: 7 Monthly Depreciaation 8 Other Fixed Cost 9 Total Fixed Cost 10 Monthly Capacity 11 Unit Fixed Cost Unit Variable Cost 13 Full Cost 14 15 Currently, Bio&Tech is selling 8,000 units of K-19 is at a price of $30 per unit. Lab&Tech, another division of Bio&Tech, wants to secure 1,000 units of K-19, per month to be used in by Lab Technicians. Lab&Tech is willing to pay an internal transfer price of $5 per unit. Lab&Tech will incur an additional S4 variabe cost per unit to make them more 16 safe. Lab&Tech sells its product of $20. 17 18 Required 19 A) should the internal transfer price allowed? Why? Show your work uu 10,000 15 3 18 $ 20 Your Answer: B)What is the full cost (unit fixed cost + unit variable cost) a mask for BioTech? What 121 happens if the transfer price is set at full cost? Explain. V 22 Your Answer: C) After deciding to use variable cost as the transfer price ($3), new orders of 2,000 units of K-19 at $30 per month is received. Suppose plant come only in fixed sizes of 23 10,000 masks. Analyze the options facing Blo&Tech. 24 Your Answer 26 27