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Corporation M produces SMART X product. Currently Corporation M is working at full production capacity producing 1 3 , 0 0 0 units of SMART
Corporation M produces SMART X product. Currently Corporation M is working at full production capacity producing units of SMART X Manufacturing cost per unit for SMART X is:
Direct materials $
Direct manufacturing labor
Manufacturing overhead
Total manufacturing cost $
Based on this production level, fixed manufacturing overhead cost per unit is $ and the rest of the manufacturing overhead cost is considered variable manufacturing cost. The selling price per unit is $ and the operating cost per unit, considered all variable, is $
One customer is wondering whether Corporation M will be willing to produce for him units of SMART Y that resembles SMART X but with slight modification of SMART X and would require the same manufacturing process. The customer has offered to pay Corporation M $ for a unit of SMART Y and pay half of the operating cost per unit.
Required
Assume that no overtime is worked, would you recommend Corporation M to accept the customers request? Why?
Company N a competitor of Corporation M has offered to produce units of SMART X for Corporation M so that Corporation M may accept the customers request. That is if Corporation M accepts Companys N offer, Corporation M would manufacture units of SMART X and units of SMART Y and purchase units of SMART X from Company N Company N would charge Corporation M $ per unit to manufacture SMART X On the basis of financial considerations alone, should CORPORATION M accept Companys N offer? Show your calculations.
Suppose Corporation M had been working at less than full capacity, producing units of SMART X at the time the customers offer was made. Calculate the minimum price Corporation M should accept for SMART Y under these conditions. Ignore the previous $ selling price.
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