Maurice Tutor

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Teaching Since: May 2017
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  • MCS,PHD
    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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  • Professor
    Phoniex University
    Oct-2001 - Nov-2016

Category > Accounting Posted 16 Aug 2017 My Price 11.00

Alton Inc.

11-33    Special Order Alton Inc. is working at full production capacity producing 20,000 units of a unique product. Manufacturing costs per unit for the product are

 

Direct materials

$ 9

Direct labor

8

Manufacturing  overhead

10

Total manufacturing cost

$27

 

The unit manufacturing overhead cost is based on a $4 variable cost per unit and $120,000 fixed costs. The nonmanufacturing costs, all variable, are $8 per unit, and the sales price is $45 per unit.

Sports Headquarters Company (SHC) has asked Alton to produce 5,000 units of a modifica- tion of the new product. This modification would require the same manufacturing processes. SHC has offered to share the nonmanufacturing costs equally with Alton. Alton would sell the modified product to SHC for $35 per unit.

Required

1.    Should Alton produce the special order for SHC? Why or why not?

2.    Suppose that Alton Inc. had been working at less than full capacity to produce 16,000 units of the prod- uct when SHC made the offer. What is the minimum price that Alton should accept for the modified product under these conditions?

Answers

Maurice Tutor
(5)
Status NEW Posted 16 Aug 2017 09:08 PM My Price 11.00

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