Answer:
Instructions are listed below
Explanation:
Giving the following information:
The following is the cost of each unit:
Materials $ 36.00
Labor 14.00
Variable overhead 4.00
Fixed overhead ($1,890,000/105,000 units) 18.00
Total $ 72.00
Simpson Company has approached Andreasen with an offer to buy 8,000 thermostats for $60 each. The regular price is $100.
Simpson requires that each unit use its branding, which requires a more expensive label, resulting in an additional $2.00 per unit material cost. The Simpson order will also require a one-time rental of packaging equipment for $30,000.
Because this is a special offer and we have unused capacity, we will not have into account the fixed costs.
A)
Costs:
Materials $ 36.00
Labor 14.00
Variable overhead 4.00
Label= 2
Total variable cost= $56
Total cost= 56*8000 + 30000= $478,000
B) Sales= 8000*60= $480,000
Costs= 478,000
Gross profit= 2,000
The offer is profitable.
C) break-even point= fixed costs/ contributionmargin= 30000/ (60-56)= 7500 units
