Cheyenne Contractors makes fixtures for aircraft fueling and hydraulic systems. As a supplier to the aircraft industry, the annual volumes can vary greatly depending on both civilian and military activity. Managers at Cheyenne have developed certain procedures as a part of their risk-management strategy. One of those procedures is to forecast financial results based on the possible range of production and sales for the year.

As the companys senior cost analyst, it is your responsibility to provide these forecasts. As a first step, you have collected the following information about the individual cost components:

Cost Category	Cost	Cost Information
Direct costs:
Materials	Variable	$52 per unit.
Labor	Variable	$25 per unit.
Overhead:
Indirect plant labor	Variable	$60 per unit.
Indirect plant supplies	Variable	$14 per unit.
Machine leases	Step	$698,000 per year if production is below 35,000 units; Otherwise, total lease costs are $1,233,000.
Overtime	Semi-variable	$0 for any production up to 30,000 units; $15 per unit for any additional production.
Plant depreciation	Fixed	$122,000 per year.
Plant maintenance	Step	$210,000 per shift.
Plant supervision	Step	$200,000 per shift. There is also a shift differential of $50,000, additional compensation for supervisors on a second shift.
Plant utilities	Fixed	$190,000 per year.
Miscellaneous overhead	Fixed	$105,000 per year.

Cheyenne Contractors produces to order and for the purpose of this assignment, you can assume they have no inventories. Capacity constraints require a second shift for any production over 35,000 units. Cheyenne uses an average revenue of $312 per unit for forecasting purposes.

Required:

Compute the cost per unit and the gross margin per unit assuming output and sales of:

25,000 units.

45,000 units.