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The TigerCub Corporation is working at full production capacity producing 10,500 units of a unique product, Everlast. Manufacturing cost per unit for Everlast is as follows: (Click the icon to view the cost per unit information.) A customer, the Apex Company, has asked TigerCub to produce 2,000 units of Stronglast, a modification of Everlast. Stronglast would require the same manufacturing processes as Everlast. Apex has offered to pay TigerCub $37 for a unit of Stronglast plus half of the marketing cost per unit. Read the requirements. Requirement 1. What is the opportunity cost to TigerCub of producing the 2,000 units of Stronglast? (Assume that no overtime is worked.) Determine the formula for calculating the opportunity cost, then calculate the opportunity cost of producing the 2,000 units of Stronglast. ( Selling price per unit Total variable cost per unit )x Units Opportunity cost ( $ 44 S 22 ) 2,000 $ 44,000 Requirement 2. The Chesapeake Corporation has offered to produce 2,000 units of Everlast for TigerCub so that TigerCub may accept the Apex offer. That is, if TigerCub accepts the Chesapeake offer, TigerCub would manufacture 8,500 units of Everlast and 2,000 units of Stronglast and purchase 2,000 units of Everlast from Chesapeake. Chesapeake would charge TigerCub $36 per unit to manufacture Everlast. On the basis of financial considerations alone, should TigerCub accept the Apex offer? Show your calculations TigerCub is considering manufacturing 8,500 units of Everlast and 2,000 units of Stronglast and purchasing 2,000 units of Everlast from Chesapeake. Chesapeake would charge TigerCub $36 per unit to manufacture Everlast. Begin by completing the following table for manufactured Stronglast units and purchased Everlast units. Manufacture Purchase Total Stronglast Everlast $ 37 $ 44 Selling price per unit Total variable cost per unit 19 42 $ 18 Contribution margin per unit Contribution margin from selling 2,000 units $ 36,000 $ 4,000 $ 40,000 The TigerCub Corporation is working at full production capacity producing 10,500 units of a unique product, Everlast. Manufacturing cost per unit for Everlast is as follows: (Click the icon to view the cost per unit information.) A customer, the Apex Company, has asked TigerCub to produce 2,000 units of Stronglast, a modification of Everlast. Stronglast would require the same manufacturing processes as Everlast. Apex has offered to pay TigerCub $37 for a unit of Stronglast plus half of the marketing cost per unit. Read the requirements. ($ 44 22 2,UUU 44, UUU Requirement 2. The Chesapeake Corporation has offered to produce 2,000 units of Everlast for TigerCub so that TigerCub may accept the Apex offer. That is, if TigerCub accepts the Chesapeake offer, TigerCub would manufacture 8,500 units of Everlast and 2,000 units of Stronglast and purchase 2,000 units of Everlast from Chesapeake. Chesapeake would charge TigerCub $36 per unit to manufacture Everlast. On the basis of financial considerations alone, should TigerCub accept the Apex offer? Show your calculations TigerCub is considering manufacturing 8,500 units of Everlast and 2,000 units of Stronglast and purchasing 2,000 units of Everlast from Chesapeake. Chesapeake would charge TigerCub $36 per unit to manufacture Everlast. Begin by completing the following table for manufactured Stronglast units and purchased Everlast units. Manufacture Purchase Stronglast Everlast Total Selling price per unit $ 37 $ 44 Total variable cost per unit 19 42 $ 18 $ Contribution margin per unit Contribution margin from selling 2,000 units $ 36,000 $ 4,000 $ 40,000 On the basis of financial considerations alone, TigerCub should refuse the Chesapeake offer. Requirement 3. Suppose TigerCub had been working at less than full capacity, producing 8,500 units of Everlast, at the time the Apex offer was made. Calculate the minimum price TigerCub should accept for Stronglast under these conditions. (Ignore the previous $37 selling price.) The minimum selling price would be $ 19 Data table oo Direct materials $ 8 Direct manufacturing labor 2 12 Manufacturing overhead $ 22 Total manufacturing cost Manufacturing overhead cost per unit is based on variable cost per unit of $6 and fixed costs of $63,000 (at full capacity of 10,500 units). Marketing cost per unit, all variable, is $6, and the selling price is $44. Print Done The TigerCub Corporation is working at full production capacity producing 10,500 units of a unique product, Everlast. Manufacturing cost per unit for Everlast is as follows: (Click the icon to view the cost per unit information.) A customer, the Apex Company, has asked TigerCub to produce 2,000 units of Stronglast, a modification of Everlast. Stronglast would require the same manufacturing processes as Everlast. Apex has offered to pay TigerCub $37 for a unit of Stronglast plus half of the marketing cost per unit. Read the requirements. Requirement 1. What is the opportunity cost to TigerCub of producing the 2,000 units of Stronglast? (Assume that no overtime is worked.) Determine the formula for calculating the opportunity cost, then calculate the opportunity cost of producing the 2,000 units of Stronglast. ( Selling price per unit Total variable cost per unit )x Units Opportunity cost ( $ 44 S 22 ) 2,000 $ 44,000 Requirement 2. The Chesapeake Corporation has offered to produce 2,000 units of Everlast for TigerCub so that TigerCub may accept the Apex offer. That is, if TigerCub accepts the Chesapeake offer, TigerCub would manufacture 8,500 units of Everlast and 2,000 units of Stronglast and purchase 2,000 units of Everlast from Chesapeake. Chesapeake would charge TigerCub $36 per unit to manufacture Everlast. On the basis of financial considerations alone, should TigerCub accept the Apex offer? Show your calculations TigerCub is considering manufacturing 8,500 units of Everlast and 2,000 units of Stronglast and purchasing 2,000 units of Everlast from Chesapeake. Chesapeake would charge TigerCub $36 per unit to manufacture Everlast. Begin by completing the following table for manufactured Stronglast units and purchased Everlast units. Manufacture Purchase Total Stronglast Everlast $ 37 $ 44 Selling price per unit Total variable cost per unit 19 42 $ 18 Contribution margin per unit Contribution margin from selling 2,000 units $ 36,000 $ 4,000 $ 40,000 The TigerCub Corporation is working at full production capacity producing 10,500 units of a unique product, Everlast. Manufacturing cost per unit for Everlast is as follows: (Click the icon to view the cost per unit information.) A customer, the Apex Company, has asked TigerCub to produce 2,000 units of Stronglast, a modification of Everlast. Stronglast would require the same manufacturing processes as Everlast. Apex has offered to pay TigerCub $37 for a unit of Stronglast plus half of the marketing cost per unit. Read the requirements. ($ 44 22 2,UUU 44, UUU Requirement 2. The Chesapeake Corporation has offered to produce 2,000 units of Everlast for TigerCub so that TigerCub may accept the Apex offer. That is, if TigerCub accepts the Chesapeake offer, TigerCub would manufacture 8,500 units of Everlast and 2,000 units of Stronglast and purchase 2,000 units of Everlast from Chesapeake. Chesapeake would charge TigerCub $36 per unit to manufacture Everlast. On the basis of financial considerations alone, should TigerCub accept the Apex offer? Show your calculations TigerCub is considering manufacturing 8,500 units of Everlast and 2,000 units of Stronglast and purchasing 2,000 units of Everlast from Chesapeake. Chesapeake would charge TigerCub $36 per unit to manufacture Everlast. Begin by completing the following table for manufactured Stronglast units and purchased Everlast units. Manufacture Purchase Stronglast Everlast Total Selling price per unit $ 37 $ 44 Total variable cost per unit 19 42 $ 18 $ Contribution margin per unit Contribution margin from selling 2,000 units $ 36,000 $ 4,000 $ 40,000 On the basis of financial considerations alone, TigerCub should refuse the Chesapeake offer. Requirement 3. Suppose TigerCub had been working at less than full capacity, producing 8,500 units of Everlast, at the time the Apex offer was made. Calculate the minimum price TigerCub should accept for Stronglast under these conditions. (Ignore the previous $37 selling price.) The minimum selling price would be $ 19 Data table oo Direct materials $ 8 Direct manufacturing labor 2 12 Manufacturing overhead $ 22 Total manufacturing cost Manufacturing overhead cost per unit is based on variable cost per unit of $6 and fixed costs of $63,000 (at full capacity of 10,500 units). Marketing cost per unit, all variable, is $6, and the selling price is $44. Print Done
