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Complete the problems below. You must show your work to receive full credit. Problem 1: To manufacture a widget component requires an overhead (fixed) cost

Complete the problems below. You must show your work to receive full credit.


Problem 1:


To manufacture a widget component requires an overhead (fixed) cost of $4000 and a variable unit cost of $5.50 per unit. What is the total cost and the average cost of producing a lot of 1500 widgets? If the selling price is $16 per unit, what is the break-even point? Explain what the break-even results means in terms of evaluating profit or loss.


Problem 2:


A manufacturing company is negotiating with a potential supplier for the purchase of 150,000 components. The manufacturer uses reverse pricing analysis to estimate the supplier’s variable costs are $7.00 per unit and that fixed costs, depreciation, overhead, etc., are $55,000. The supplier quotes a selling price at $12 per unit. Calculate the estimated average cost per unit. Do you think the supplier is asking too much for their parts? Could the purchasing department negotiate a better price? Explain your answer.

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