I am having trouble with a problem that I am trying to solve. I have followed several examples and when I click on check my answers I get the required 2 and required 3 wrong and I am doing the problem the same way that the examples is doing the problem. I got the required 1 right.

Here is the problem that I am having a hard time with:

Garner Industries manufactures precision tools. The firm uses an activity-based costing system. CEO Deb Garner is very proud of the accuracy of the system in determining product costs. She noticed that since the installment of the ABC system 10 years earlier, the firm had become much more competitive in all aspects of the business and earned an increasing amount of profits every year.

In the last two years, the firm sold 2.672 million units to 2,600 customers each year. The manufacturing cost is $600 per unit. In addition, Garner has determined that the order-filling cost is $51.92 per unit. The $791.00 selling price per unit includes 13% markup to cover administrative costs and profits.

The order-filling cost per unit is determined based on the firms costs for order-filling activities. Order-filling capacity can be added in blocks of 60 orders. Each block costs $120,000. In addition, the firm incurs $1,400 order-filling costs per order.

Garner serves two types of customers designated as PC (Preferred Customer) and SC (Small Customer). Each of the 400 PCs buys, on average, 5,000 units in two orders. The firm also sells 672,000 units to 4,000 SCs. On average each SC buys 168 units in 10 orders. Ed Cheap, a buyer for one PC, complains about the high price he is paying. Cheap claims that he has been offered a price of $700 per unit and threatens to take his business elsewhere. Garner does not give in because the $700 price Cheap demands is below cost. Besides, she has recently raised the price to SC to $802.38 per unit and experienced no decline in orders.

Required:

1. Demonstrate how Garner arrives at the $51.92 order-filling cost per unit.

2. What would be the amount of loss (profit) per unit if Garner sells to Cheap at $700 per unit?

3. What is the amount of loss (profit) per unit at the $802.38 selling price per unit for units sold to SC?