Managerial Accounting

Garner Industries manufactures precision tools. The firm uses an activitybased costing system. CEO Deb Garner is very proud ofthe accuracy of the system in determining product costs. She noticed that since the installment of the ABC system 10 years earlier, the rm had become much more competitive in all aspects ofthe business and earned an increasing amount of profits every year. In the last two years, the firm sold 0.662 million units to 2,100 customers each year. The manufacturing cost is $300 per unit. In addition, Garner has determined that the orderlling cost is $38.52 per unit. The $448-00 selling price per unit includes 12% markup to cover administrative costs and profits. The orderfilling cost per unit is determined based on the firm's costs for orderlling activities. Orderfilling capacity can be added in blocks of 60 orders. Each block costs $60,000. In addition, the rm incurs $1,500 order-lling costs per order. Garner serves two types of customers designated as PC [Preferred Customer] and SC [Small Customer]. Each of the 100 PCs buys, on average, 5,000 units in two orders. The firm also sells 162,000 units to 1,000 SCs. On average each SC buys 152 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 $400 per unit and threatens to take his business elsewhere. Garner does not give in because the $400 price Cheap demands is below cost. Besides, she has recently raised the price to SC to $454.32 per unit and experienced no decline in orders. Required: 1. Demonstrate how Garner arrives at the $38.52 order-filling cost per unit. 2. What would be the amount of loss [profit] per unit if Gamer sells to Cheap at $400 per unit? 3. 1What is the amount of loss [profit] per unit atthe $454.32 selling price per unit for units sold to SC