Question
Problem 1 (30 Points) ABC Corporation produces the same power generator in two Indiana plants, a new plant in Gary and an older plant in
Problem 1 (30 Points) ABC Corporation produces the same power generator in two Indiana plants, a new plant in Gary and an older plant in Moline. The following data are available for the two plants.
| Gary | Moline | ||
Selling Price |
| $150 |
| $150 |
Variable Manufacturing Cost per unit | $72 |
| $88 |
|
Fixed Manufacturing Cost per unit | $30 |
| $15 |
|
Variable Marketing and Distribution Cost per unit | $14 |
| $14 |
|
Fixed Marketing and Distribution Cost per unit | $19 |
| $14.5 |
|
Total cost per unit |
| 135 |
| 131.5 |
Operating Income per unit |
| 15 |
| 18.5 |
|
|
|
|
|
Production rate per day | 400 | units | 320 | Units |
Normal annual capacity usage | 240 | Days | 240 | Days |
Maximum annual capacity | 300 | Days | 300 | Days |
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 Gary and $8.00 per unit in Moline.
ABC 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 companys 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 * 300 days) and Gary operates at its normal volume (400 units per day * 240 days).
Required (each question 10 points):
- Calculate the breakeven point in units for the Gary plant and for the Moline plant.
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