CH 10 Q1

CH 10 Q2

Syntech makes digital cameras for drones. Their basic digital camera uses $80 in variable costs and requires $1,500 per month in fixed costs. Syntech sells 100 cameras per month. If they process the camera further to enhance its functionality, it will require an additional $40 per unit of variable costs, plus an increase in fixed costs of $1,100 per month. The current price of the camera is $150. The marketing manager is positive that they can sell more and charge a higher price for the improved version. At what price level would the upgraded camera begin to improve operational earnings? Price to be charged Trifecta Distributors has decided to discontinue manufacturing its X Plus model. Currently, the company has 4,500 partially completed X Plus models on hand. The government has put a recall on a particular part in the X Plus model, so each base model must now be reworked to accommodate the style of the new part. The company has spent $110 per unit to manufacture these X Plus models to their current state. Reworking each X Plus model will cost $21 for materials and $19 for direct labor. In addition, $7 of variable overhead and $33 of allocated fixed overhead (relating primarily to depreciation of plant and equipment) will be allocated per unit. If Trifecta completes the X Plus models, it can sell them for $159 per unit. On the other hand, another manufacturer is interested in purchasing the partially completed units for $104 each and converting them into Z Plus models. Prepare a differential analysis per unit to determine if Trifecta should complete the X Plus models or sell them in their current state. Differential revenue per unit Differential costs: Materials Direct labor Variable overhead Differential benefit per unit Trifecta should sell the X Plus models