The Lynbrook Company manufactures a product called a Sanyo. The company normally produces and sells 60,000 Sanyos each year at a selling price of $32 per unit. The unit cost of a Sanyo at 60,000 units are as follows:

Direct Materials $.10.00

Direct Labor 4.50

Variable Manufacturing overhead 2.30

Fixed Manufacturing overhead 5.00 ($300,000 total)

Variable selling expenses 1.20

Fixed selling expenses 3.50 ($210,000 total)

Total Cost per unit $26.50

Your manager had several questions about the production and sale of Sanyos. Consider each question independently.

1. The Lynbrook Company has the capacity to produce 90,000 Sanyos each year without any increase in fixed manufacturing overhead costs. If the company increased the fixed selling expenses by $80,000 the marketing department believes that sales would increase by 25% above the present 60,000 units each year. Determine if the increased fixed selling expenses would be justified? (show all supporting computations)

2.The Lynbrook Company has the capacity to produce 90,000 Sanyos each year without any increase in fixed manufacturing overhead costs. A customer in Norway wants to purchase 20,000 Sanyos. Import duties on the Sanyos would be $1.70 per unit, and costs for permits and licenses would be $9,000. The only selling costs that would be associated with the order would be $3.20 per unit shipping cost. Compute the per unit break-even price on this order (sales = costs).

3. Lynbrook has 1,000 defective Sanyos on hand and are therefore considered to be seconds. Due to the defects, it will be impossible to sell these units at the normal price through regular sales channels. What is the unit cost figure that is relevant for setting a minimum selling price? Explain.

4. Another manufacturer has offered Lynbrook to produce the Sanyos and ship them directly to Lynbrook's customers. If The Lynbrook Company accepts this offer, the facilities that it uses to produce Sanyos would be idle; however, fixed manufacturing overhead costs would be reduced by 75%. Because the outside manufacturer would pay for all shipping costs, the variable selling expenses would be only two-thirds of their present amount. Compute the unit cost that is relevant for comparison to the price quoted by the outside manufacturer (make vs buy)