Cost Accounting

PENNSYLVANIA CORPORATION .......has developed a new product, cleverly named Product X, the manufacture of which requires an extremely high degree of technical skill. Management believes that there is an excellent opportunity for its technical force to leam and improve as they become accustomed to the Management projects an 80% learning curve with respect to the production of Product X. Additional cost information relating to this product is as follows: $75,000 per unit $25 per hour $6 per hour $10 per hour $3,000 per unit $1,000 per unit $2,500 per unit $2,000 per unit Direct materials Direct labor rate Variable overhead: Applied on the basis of direct-labor hrs Fixed overhead: Applied on the basis of direct-labor hrs Variable selling Fixed selling Variable adminstrative Fixed administrative REQUIRED: 1) Upon completion of the eighth unit, the cumulative average direct labor hours required per unit of the product will be how much? 2) Upon completion of the eighth unit, the cumulative (total) direct labor hours will be? 3) After completing the first unit, the estimated total direct labor hours required to produce severn additional units will be? government contract calling for the production of an additional 3 units. labor hours will be needed for this govermment contract? How many additional 5) REGARDLESS OF YOUR ANSWERS ABOVE NOW ASSUME for the remainder of this problem that these three units will require 15,000 direct labor hours. They have ample capacity to produce the additional 3 units without disrupting other operations. The company prices these parts on a "cost-plus" basis using of 25%. How much should the company bid on this project? as the basis for their bid and a markup 6) Assume the same situation, and the company has now received a one-time special order from a foreign customer for 3 units, at a total price of $725,000. Again assume that there is ample capacity to produce the required units without affecting normal operations and that these three units will require 15,000 direct labor hours as noted in #5 above. Should they accept or reject this order? Why or not? How much better or worse off would they be if the accepted this order? What is the minimum price that they must charge for this order negatively affecting their profit? unit, without