Question
Glisan Corporation's relevant range of activity is 4,000 units to 8,000 units. When it produces and sells 6,000 units, its average costs per unit are
Glisan Corporation's relevant range of activity is 4,000 units to 8,000 units. When it produces and sells 6,000 units, its average costs per unit are as follows:
Average Cost per Unit | |||
Direct materials | $ | 5.75 | |
Direct labor | $ | 3.00 | |
Variable manufacturing overhead | $ | 1.60 | |
Fixed manufacturing overhead | $ | 4.50 | |
Fixed selling expense | $ | 0.75 | |
Fixed administrative expense | $ | 0.60 | |
Sales commissions | $ | 1.50 |
Glisan currently sells at a price of $24 per unit.
A. What is net operating income assuming Glisan sells 6200 units?
B. Compute the gross margin assuming Glisan sells 6700 units.
C. Assume that Glisan can only increase sales to 6400 units by decreasing the current price of $24 by 1.6%. If Glisan does not decrease the price, then demand will stay at 6,000 units. How much better or worse off is Glisan if it decreases the price? If better off, enter your answer as a positive number, if worst off enter your answer as a negative number. Round to the nearest dollar
Show your work for Gilson's part A, B, and C.
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