Unter Components manufactures low-cost navigation systems for installation in ride-sharing cars. It sells these systems to various car services that can customize them for their locale and business model. It manufactures two systems, the Star100 and the Star150, which differ in terms of capabilities. The following information is available. Costs per Unit Direct materials Direct labor Variable overhead Fixed overhead Total cost per unit Price Units sold Star100 65 30 15 90 $ 200 $ 290 Star150 $ 75 40 20 120 $ 255 $ 390 2,000 The average wage rate is $20 per hour. Variable overhead varies with the quantity of direct labor-hours. The plant has a capacity of 20,000 direct labor-hours, but current production uses only 10,000 direct labor-hours. Required: a. A nationwide car-sharing service has offered to buy 2,500 Star100 systems and 2,500 Star150 systems if the price is lowered to a-1. If Unter accepts the offer, how many direct labor-hours will be required to produce the additional systems? a-2. Complete the following table to determine the differential profit increase (or decrease) if Unter accepts this proposal. Prices on regular sales will remain the same. b-1. Suppose that the car sharing has offered instead to buy 3,500 each of the two models at $200 and $250, respectively. This customer will purchase the 3,500 units of each model only in an all-or-nothing deal. That is, Unter must provide all 3,500 units of each model or none. Unter's management has decided to fill the entire special order for both models. In view of its capacity constraints, Unter will reduce sales to regular customers as needed to fill the special order. Complete the table below to determine the total contribution margin with the special order added. b-2. How much will the profits change if the order is accepted? Assume that the company cannot increase its production capacity to meet the extra demand. c-1. Assume that, in the situation presented in requirement b-1, the plant can work overtime. Direct labor costs for the overtime production increased to $30.00 per hour. Variable overhead costs for overtime production are $5 per hour more than for normal production. Complete the table below to determine the total contribution margin. c-2. How much will the profits change in this situation? Complete this question by entering your answers in the tabs below. Reg A1 Reg AZ Req B1 Req B2 Reg ci Reg C2 How much will the profits change if the order is accepted? Assume that the company cannot increase its production capacity to meet the extra demand. Increase in profit Reg A1 Reg A2 Req B1 Reg B2 Reg C1 Reg C2 Assume that, in the situation presented in requirement b-1, the plant can work overtime. Direct labor costs for the overtime production increased to $30.00 per hour. Variable overhead costs for overtime production are $5 per hour more than for normal production. Complete the table below to determine the total contribution margin. Star 100 Star150 Total $ 0 S 0 S 0 Special Order: Contribution margin per unit Number of units Total contribution margin Regular production: Contribution margin per unit Number of units Total contribution margin Total contribution margin for both: Additional direct-labor costs Additional variable overhead Total contribution margin for both (with additional costs): S 0 S 0 S 0 $ 0 S Req A1 Reg A2 Reg B1 Reg B2 Reg C1 Reg C2 How much will the profits change in this situation? c-1. Assume that, in the situation presented in requirement b-1. the plant can work overtime. Direct labor costs for the ove production increased to $30.00 per hour. Variable overhead costs for overtime production are $5 per hour more than for production Complete the table below to determine the total contribution margin c-2. How much will the profits change in this situation? Complete this question by entering your answers in the tabs below. Reg A1 Reg A2 Req B1 Req B2 Req ci Reg C2 Suppose that the car-sharing service has offered instead to buy 3,500 each of the two models at $200 and $250, respectively. This customer will purchase the 3,500 units of each model only in an all-or-nothing deal. That is, Unter must provide all 3,500 units of each model or none. Unter's management has decided to fill the entire special order for both models. In view of its capacity constraints, Unter will reduce sales to regular customers as needed to fill the special order. Complete the table below to determine the total contribution margin with the special order added. Show less Star 100 Star150 Total s 115 90 3,500 315,000 3,500 402.500 5 S 717,500 Special Order: Contribution margin per unit Number of units Total contribution margin Regular production: Contribution margin per unit Number of units Total contribution margin Total contribution margin for bath: s 180 $ 255 $ 0 S 0 0 717,500 S Raq A2 Req B2 >
