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Part B Juber manufactures high-end sunglasses that it sells in retail shops and online for $310, on average. Assume the following represents manufacturing and other
Part B Juber manufactures high-end sunglasses that it sells in retail shops and online for $310, on average. Assume the following represents manufacturing and other costs. Variable costs per unit Fixed Costs per month Direct materials $80 Factory Overhead $450.000 375.000 Direct labor 50 Selling and administrative Factory Overhead 35 Total $825,000 Distribution 10 Total $175 The variable distribution costs are for transportation to retail partners. Assume the current monthly production and sales volume is 15,000 units. Monthly capacity is 20,000 units. Required Determine the effect of each of the following independent situations on monthly profits. a) A $50 increase in the unit selling price should result in a 2,000-unit decrease in monthly sales. (1.5 marks) b) A 10% decrease in the unit selling price should result in a 6,000-unit increase in monthly sales. However, because of capacity constraints, the last 1,000 units would be produced during overtime with the direct labor costs increasing by 50%. (1.5 marks) C) The glasses also come with a choice of lens tint. Assume that eliminating that option would reduce variable costs by $5 and eliminate $50,000 in fixed factory overhead. The selling price would likely have to decrease to $290 per unit. (1 mark)
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