Answered step by step
Verified Expert Solution
Question
1 Approved Answer
K Preston Corporation produces the same power generator in two Illinois plants, a new plant in Peoria and an older plant in Moline. The
K Preston Corporation produces the same power generator in two Illinois plants, a new plant in Peoria and an older plant in Moline. The following data are available for the two plants. Requirements More info 1. Calculate the breakeven point in units for the Peoria plant and for the Moline plant. 2. Calculate the operating income that would result from the production manager's plan to produce 96,000 units at each plant. 3. Determine how the production of 192,000 units should be allocated between the Peoria and Moline plants to maximize operating income for Preston Corporation. Show your calculations. All fixed costs per unit are calculated based on a normal capacity usage consisting of 240 working days. When the number of working days exceeds 240, overtime charges raise the variable manufacturing costs of additional units by $3.00 per unit in Peoria and $7.00 per unit in Moline. Preston Corporation is expected to produce and sell 192,000 power generators during the coming year. Wanting to take advantage of the higher operating income per unit at Moline, the company's production manager has decided to manufacture 96,000 units at each plant, resulting in a plan in which Moline operates at maximum capacity (320 units per day x 300 days) and Peoria operates at its normal volume (400 units per day 240 days). Print Done - A B D E 1 2 Selling price Peoria Moline $ 155.00 $ 155.00 3 Variable manufacturing cost per unit $ 76.00 $ 83.00 4 Fixed manufacturing cost per unit 35.00 20.00 Variable marketing and distribution cost per 5 unit 15.00 15.00 6 Fixed marketing and distribution cost per unit 15.00 18.00 7 Total cost per unit 141.00 136.00 8 Operating income per unit S 14.00 $ 19.00 9 Production rate per day 400 units 320 units 10 Normal annual capacity usage 240 days 240 days 11 Maximum annual capacity 300 days 300 days ne
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