The Buffalo Corporation is working at full production capacity producing 10,000 units of a unique product, Everlast. Manufacturing cost per unit for Everlast is: B (Click the icon to view the cost per unit information.) A customer, the Apex Company, has asked Buffalo to produce 3,000 units of Stronglast, a modification of Everlast. Stronglast would require the same manufacturing processes as Everlast. Apex has offered to pay Buffalo $36 for a unit of Stronglast plus half of the marketing cost per unit. Read the requirements. Data table - Direct materials $ 6 Direct manufacturing labor 4 Manufacturing overhead $ 21 Total manufacturing cost Manufacturing overhead cost per unit is based on variable cost per unit of $4 and fixed costs of $70,000 (at full capacity of 10,000 units). Marketing cost per unit, all variable, is $2, and the selling price is $42. Print Done Requirements 1. What is the opportunity cost to Buffalo of producing the 3,000 units of Stronglast? (Assume that no overtime is worked.) 2. The Chesapeake Corporation has offered to produce 3,000 units of Everlast for Buffalo so that Buffalo may accept the Apex offer. That is, if Buffalo accepts the Chesapeake offer, Buffalo would manufacture 7,000 units of Everlast and 3,000 units of Stronglast and purchase 3,000 units of Everlast from Chesapeake. Chesapeake would charge Buffalo $33 per unit to manufacture Everlast. On the basis of financial considerations alone, should Buffalo accept the Chesapeake offer? Show your calculations. 3. Suppose Buffalo had been working at less than full capacity, producing 7,000 units of Everlast, at the time the Apex offer was made. Calculate the minimum price Buffalo should accept for Stronglast under these conditions. (Ignore the previous $36 selling price.) Requirement 1. What is the opportunity cost to Buffalo of producing the 3,000 units of Stronglast? (Assume that no overtime is worked.) Determine the formula for calculating the opportunity cost, then calculate the opportunity cost of producing the 3,000 units of Stronglast. Selling price per unit Total variable cost per unit x Units Opportunity cost 42 16 3000 78000 Requirement 2. The Chesapeake Corporation has offered to produce 3,000 units of Everlast for Buffalo so that Buffalo may accept the Apex offer. That is, if Buffalo accepts the Chesapeake offer, Buffalo would manufacture 7,000 units of Everlast and 3,000 units of Stronglast and purchase 3,000 units of Everlast from Chesapeake. Chesapeake would charge Buffalo $33 per unit to manufacture Everlast. On the basis of financial considerations alone, should Buffalo accept the Apex offer? Show your calculations. Buffalo is considering manufacturing 7,000 units of Everlast and 3,000 units of Stronglast and purchasing 3,000 units of Everlast from Chesapeake. Chesapeake would charge Buffalo $33 per unit to manufacture Everlast. Begin by completing the following table for manufactured Stronglast units and purchased Everlast units. Manufacture Purchase Stronglast Everlast Total Selling price per unit Total variable cost per unit Contribution margin per unit Contribution margin from selling units Requirement 3. Suppose Buffalo had been working at less than full capacity, producing 7,000 units of Everlast, at the time the Apex offer was made. Calculate the minimum price Buffalo should accept for Stronglast under these conditions (Ignore the previous $36 selling price.) The minimum selling price would be $