Question
West Coast Electronics (WCE) produces high-quality audio and video equipment. One of the company's most popular products is a high-definition personal video recorder (PVR) for
West Coast Electronics (WCE) produces high-quality audio and video equipment. One of the company's most popular products is a high-definition personal video recorder (PVR) for use with digital television systems. Demand has increased rapidly for the PVR over the past three years, given the appeal to customers of being able to easily record programs while they watch live television, watch recorded programs while they record a different program, and save dozens of programs for future viewing on the unit's large internal hard drive. A complex production process is utilized for the PVR involving both laser and imaging equipment. WCE has a monthly production capacity of 4,000 hours on its laser machine and 1,000 hours on its image machine. However, given the recent increase in demand for the PVR, both machines are currently operating at 90% of capacity every month, based on existing orders from customers. Direct labour costs are $15 and $20 per hour to operate, respectively, the laser and image machines. The revenue and costs on a per unit basis for the PVR are as follows:
Selling price $320.00 Cost to manufacture: Direct materials $50.00 Direct labour-laser process 60.00 Direct labour-image process 20.00 Variable overhead 40.00 Fixed overhead 50.00 Variable selling costs 20.00 240.00 Operating profit $ 80.00Step by Step Solution
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