Question
Icarus Aircraft Company (IAC) is preparing to bid on 16 amphibious airliners of a type that it has never made before. The potential buyer is
Icarus Aircraft Company (IAC) is preparing to bid on 16 amphibious airliners of a type that it has never made before. The potential buyer is West Pacific Airlines, which plans to use the airliners to service small islands that do not have landing fields. The managers of Icarus believe that their major competitor, Birch Airplane Company, will bid $6 million per plane. The managers of Icarus want to earn an average contribution margin of $800,000 on the planes. They have developed the following estimates: Materials and purchased parts, per plane $2,800,000 Labor and variable overhead for first plane 3,800,000 Learning effect on labor and variable overhead (per doubling) 85%. a. What is the cost (labor and variable overhead (L&VOH) plus materials and purchased parts(M&PP)) of the 16th aircraft? b. What is the average L&VOH for all 16 aircraft? c. What is the total cost of the 16 planes and will the contract meet the $800K contribution margin requirement?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started