Barret Company has fixed costs of $10,000,000 and faces a tax rate of 25%. The company accountant has advised you that the unit sales required to earn an after tax profit of $600,000 is 100,000. If the selling price per unit is $200 which of the following must be the variable cost per unit? Barret Company has fixed costs of $10,000,000 and faces a tax rate of 25%. The company accountant has advised you that the unit sales required to earn an after tax profit of $600,000 is 100,000. If the selling price per unit is $200 which of the following must be the variable cost per unit?

$92

$84

$108

$94

2.

Fox Company has just received an unexpected order from a customer for 1,000 units of a new product. The product will have total variable costs of $15.00 per unit. Fox Company will have to rent a machine for $10,000, pay overtime amounting to $5,000 to a supervisor to handle this order, and fixed packaging and shipping costs of $2,000 for this order.

The minimum (floor) price per unit that Fox Company should charge for this order is:

Fox Company has just received an unexpected order from a customer for 1,000 units of a new product. The product will have total variable costs of $15.00 per unit. Fox Company will have to rent a machine for $10,000, pay overtime amounting to $5,000 to a supervisor to handle this order, and fixed packaging and shipping costs of $2,000 for this order.

The minimum (floor) price per unit that Fox Company should charge for this order is:

$32

$15

$30

$25

3

Rose Company currently produces Product X that sells for $10.00 per unit, has a variable cost of $6.00 per unit, and has an allocated a manufacturing overhead cost of $1.00 per unit of which $0.60 is fixed. An outside supplier has offered to supply Product X.

What is the maximum (ceiling) price per unit that Rose Company should be willing to pay to the outside supplier for Product X?

$6.40 per unit

$10.00 per unit

4

Susan's 5-year-old Hyundai Santa Fe requires repairs estimated at $3,000 to make it roadworthy again. Her friend, Julie, suggested that she should buy a 5-year-old used Toyota Rav4 instead for $3,000 cash. Susan estimated the following costs for the two cars:

	Hyundai Santa Fe	Toyota Rav4
Acquisition cost	$15,000	$3,000
Repairs	$3,000
Annual operating costs
(Gas, maintenance, insurance)	$2,280	$2,100

What should Susan do? What are her savings in the first year?

Buy the Toyota Rav4; $9,780

Buy the Toyota Rav4; $180

Fix the Hyundai Santa Fe; $5,518

Fix the Hyundai Santa Fe; $5,280

$6.60 per unit

$6.00 per unit

5.