Why Choose Us?
0% AI Guarantee
Human-written only.
24/7 Support
Anytime, anywhere.
Plagiarism Free
100% Original.
Expert Tutors
Masters & PhDs.
100% Confidential
Your privacy matters.
On-Time Delivery
Never miss a deadline.
The Anderson Company has a maximum production capacity of 25,000 units per year
The Anderson Company has a maximum production capacity of 25,000 units per year. For that capacity? level, fixed costs are $290,000 per year. Variable costs per unit are $45. In the coming? year, the company has orders for 29,500 units at $80. The company wants to make a minimum overall operating income of $185,000 on these 29,500 units.
Requirement
What maximum unit purchase price would Anderson Company be willing to pay to a subcontractor for the additional 4,500 units it cannot manufacture itself to earn an operating income of $185,000??
Determine the maxiumum total cost to Anderson Company of producing the 29,500 units while earning an operating income of $185,000.
Total costs to produce 29,500 units is
Identify the total cost to Anderson Company to manufacture 25,000 units.
Total costs to manufacture 25,000 units
Determine the maxiumum additional costs to purchase 4,500 units from a subcontractor that Anderson Company would pay in order to earn an operating income of $185,000.
The additional costs to purchase 4,500 units from a subcontractor is
What maximum unit purchase price would Anderson Company be willing to pay to a subcontractor for the additional 4,500 units it cannot manufacture itself to earn an operating income of $185,000?? ?(Round your answer to the nearest? cent.)
The maximum price per unit that can be paid to a subcontractor is
Expert Solution
Computation of the total cost to produce 29,500 units:-
Total cost = Sales proceeds - Desired profit
= (29,500 * $80) - $185,000
= $2,360,000 - $185,000
= $2,175,000
Computation of the total costs to manufacture 25,000 units:-
Total costs to manufacture = (Number of units * Variable cost per unit) + Fixed costs
= (25,000 * $45) + $290,000
= $1,125,000 + $290,000
= $1,415,000
Computation of the additional costs:-
Additional cost = $2,175,000 - $1,415,000
= $760,000
Computation of the maximum price per unit:-
Maximum price per unit = Additional cost / Number of units to be purchased
= $760,000 / 4,500
= $168.89 per unit
Archived Solution
You have full access to this solution. To save a copy with all formatting and attachments, use the button below.
For ready-to-submit work, please order a fresh solution below.
