Stonework, Inc. specializes in producing a specialty vehicle called the Bridge. Stonework, Inc. has the following manufacturing cost:

Plant Management costs, $1,992,000 per year

Cost of leasing equipment, $1,932,000 per year

Workers wage, $800 per vehicle produced.

Direct materials costs: Steel, $1,400 per vehicle, Tires, $150 per tire, each vehicle takes 5 tires.

City license, which is charged monthly based on the number of tires used in production:

0-500 tires $40,040

501-1,000 tires $65,000

More than 1,000 tires $249,870

Stonework, Inc. currently produces 170 vehicles per month. Assume that it can sell all its production in the same period.

Q1: At the current production level, what are the variable manufacturing costs per vehicle? What is the fixed manufacturing cost per month?

Q2: Describe the behavior of the city license cost for the full range of products for which information is given to you. Apply the concept for relevant range when answering the questions.

Q3: What is the total manufacturing cost of each vehicle (Unit Cost) if. (a) 110 vehicles are produced each month? (b) 170 vehicles are produced each month?

Q4: Explain why the unit cost is different across 3(a) and 3(b). Reference the relevant concepts as needed in the explanation.

Assuming the following two questions is that the plants relevant range of production is 101-200 vehicles. In other words, you may assume that only this range of production is possible for the time being.

Q5: What suggestion can you give the manager to reduce unit cost to the extent possible? (Provide a suggestion using only information provided in the question, without making any additional assumptions about cost behavior.)

Q6: Plant management costs consist entirely of the plant managers salary. The plant manager currently does not receive any performance-based pay. To motivate them to produce more, Stonework, Inc.s management team is considering altering the managers pay structure to incorporate a performance-based bonus. They are considering the following options:

Option 1: Currently the pay structure is only fixed salary and no performance-based pay.

Option 2: Reduce fixed salary by 10% and award a bonus of $100/vehicle produced and sold.

For what range of monthly sales will the plant earn higher income from Option 1, and for what range of sales will it earn higher from Option 2? The vehicles are currently sold for $6,000 each.