The Mountain Lion Corporation is working at full production capacity producing 10,000 units of a unique product, Everlast. Manufacturing cos st is as follows: (Click the icon to view the cost per unit information.) A customer, the Apex Company, has asked Mountain Lion to produce 1,500 units of Stronglast, a modification of Everlast. Stronglast would require the same manufacturing processes as Everlast. Apex has offered to pay Mountain Lion $46 for a unit of Stronglast plus half of the marketing cost per unit. Read the requirements. - X Data table Requirements Direct materials $ 7 Vould Direct manufacturing labor 5 13 Manufacturing overhead 25 Total manufacturing cost Manufacturing overhead cost per unit is based on variable cost per unit of $5 and fixed costs of $80,000 (at full capacity of 10,000 units). Marketing cost per unit, all variable, is $4, and the selling price is $50. 1. What is the opportunity cost to Mountain Lion of producing the 1,500 units of Stronglast? (Assume that no overtime is worked.) 2. The Chesapeake Corporation has offered to produce 1,500 units of Everlast for Mountain Lion so that Mountain Lion may accept the Apex offer. That is, if Mountain Lion accepts the Chesapeake offer, Mountain Lion would manufacture 8,500 units of Everlast and 1,500 units of Stronglast and purchase 1,500 units of Everlast from Chesapeake. Chesapeake would charge Mountain Lion $45 per unit to manufacture Everlast. On the basis of financial considerations alone, should Mountain Lion accept the Chesapeake offer? Show your calculations. 3. Suppose Mountain Lion had been working at less than full capacity, producing 8,500 units of Everlast, at the time the Apex offer was made. Calculate the minimum price Mountain Lion should accept for Stronglast under these conditions. (Ignore the previous $46 selling price.) The Mountain Lion Corporation is working at full production capacity producing 10,000 units of a unique product, Everlast. Manufacturing Co Next questions is as follows: Click the icon to view the cost per unit information.) A customer, the Apex Company, has asked Mountain Lion to produce 1,500 units of Stronglast, a modification of Everlast. Stronglast would require the same manufacturing processes as Everlast. Apex has offered to pay Mountain Lion $46 for a unit of Stronglast plus half of the marketing cost per unit. Read the requirements Requirement 1. What is the opportunity cost to Mountain Lion of producing the 1,500 units of Stronglast? (Assure that no overtime is worked.) Determine the formula for calculating the opportunity cost, then calculate the opportunity cost of producing the 1.500 units of Stronglast. Opportunity cost Requirement 2. The Chesapeake Corporation has offered to produce 1,500 units of Everlast for Mountain Lion so that Mountain Lion may accept the Apex offer. That is, if Mountain Lion accepts the Chesapeake offer, Mountain Lion would manufacture 8,500 units of Everlast and 1,500 units of Stronglast and purchase 1,500 units of Everlast from Chesapeake. Chesapeake would charge Mountain Lion $45 per unit to manufacture Everlast. On the basis of financial considerations alone, should Mountain Lion accept the Apex offer? Show your calculations. Mountain Lion is considering manufacturing 8,500 units of Everlast and 1,500 units of Stronglast and purchasing 1,500 units of Everlast from Chesapeake. Chesapeake would charge Mountain Lion $45 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 1,500 units On the basis of financial considerations alone, Mountain Lion should the Chesapeake offer Requirement 3. Suppose Mountain Lion had been working at less than full capacity, producing 8.500 units of Everlast, at the time the Apex offer was made. Calculate the minimum price Mountain Lion should accept for Stronglast under these conditions. (Ignore the previous $46 selling price.)
