Required: Compute the cost per unit and the gross margin per unit assuming output and sales of: a. 500,000 units. b. 750,000 units. Note: For both the requirements, Round "per unit" answers to 2 decimal places.
Required: Compute the cost per unit and the gross margin per unit assuming output and sales of: a. 500,000 units. b. 750,000 units. Note: For both the requirements, Round "per unit" answers to 2 decimal places.
Chapter4: Operating Activities: Sales And Cash Receipts
Section: Chapter Questions
Problem 1.3C
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Transcribed Image Text:Required:
Compute the cost per unit and the gross margin per unit assuming output and sales of:
a. 500,000 units.
b. 750,000 units.
Note: For both the requirements, Round "per unit" answers to 2 decimal places.
Cost of goods sold
Overhead
Total overhead
Cost of goods sold
Cost per unit
$
Unit Produced and Sold
500,000
750,000
0
$
![Required Information
[The following information applies to the questions displayed below.]
Salvay Company is a small manufacturer that produces and sells one product for use in medical Instruments. Demand is
erratic and can vary widely from year to year. The financial managers at Salvay are planning for the coming year and have
asked for your help in forecasting unit costs and gross margin.
Stacy Choo, the cost accountant at Salvay, provides you with information about the components of manufacturing costs
along with specifying the behavior of the components. This Information is summarized in the memo that follows:
Salvay Company Memo:
To: Jorge Alcala. Controller
From: Stacy Choo, Cost Accountant
Date: November 3.
Subject: Cost Information Projections
As you requested, the following table summarizes our best estimates for manufacturing costs for the upcoming fiscal year.
These estimates are valid for any reasonable range of production.
Cost Category
Direct costs:
Materials
Labor
Overhead:
Semi-variable
Variable
Cost Behavior
Variable
Variable
Fixed
Fixed
step
Step
step
Indirect plant labor
Indirect plant supplies
Machine depreciation
Plant depreciation.
Plant maintenance
Plant supervision
Plant utilities
Property taxes on plant
Stacy also tells you that the company has a zero-Inventory policy and all projections are made under that assumption
Finally, she points out that capacity constraints require assuming a second shift for the year If annual production volume
exceeds 600,000 units.
Fixed
EDE
Cost Information
If production volume is below 550,000 units, we can source all our
materials from Bourke Supplies at $3.00 per unit. This is a
negotiated price. For any production greater than this, we will have
to pay the going market price of $4.80 per unit.
$4.50 per unit.
$2.25 per unit.
$1.25 per unit.
$218,000 per year.
$102,000 per year.
$105,000 per shift.
$280,000 per shift.
$210,000 for production up to 800,000 units;
$350,000 (total) if production is over 800,000 units.
$65,000 per year.
The marketing manager tells you that the best estimate of the price of the product is $20 per unit. His best guess is that
demand could be as low as 500,000 units or as high as 750,000 units.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6e121155-4256-460e-be39-59dcec17ee4a%2Fd48b3bdc-d9e4-4864-a7b6-8499b232ca32%2Fig93hj9_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Required Information
[The following information applies to the questions displayed below.]
Salvay Company is a small manufacturer that produces and sells one product for use in medical Instruments. Demand is
erratic and can vary widely from year to year. The financial managers at Salvay are planning for the coming year and have
asked for your help in forecasting unit costs and gross margin.
Stacy Choo, the cost accountant at Salvay, provides you with information about the components of manufacturing costs
along with specifying the behavior of the components. This Information is summarized in the memo that follows:
Salvay Company Memo:
To: Jorge Alcala. Controller
From: Stacy Choo, Cost Accountant
Date: November 3.
Subject: Cost Information Projections
As you requested, the following table summarizes our best estimates for manufacturing costs for the upcoming fiscal year.
These estimates are valid for any reasonable range of production.
Cost Category
Direct costs:
Materials
Labor
Overhead:
Semi-variable
Variable
Cost Behavior
Variable
Variable
Fixed
Fixed
step
Step
step
Indirect plant labor
Indirect plant supplies
Machine depreciation
Plant depreciation.
Plant maintenance
Plant supervision
Plant utilities
Property taxes on plant
Stacy also tells you that the company has a zero-Inventory policy and all projections are made under that assumption
Finally, she points out that capacity constraints require assuming a second shift for the year If annual production volume
exceeds 600,000 units.
Fixed
EDE
Cost Information
If production volume is below 550,000 units, we can source all our
materials from Bourke Supplies at $3.00 per unit. This is a
negotiated price. For any production greater than this, we will have
to pay the going market price of $4.80 per unit.
$4.50 per unit.
$2.25 per unit.
$1.25 per unit.
$218,000 per year.
$102,000 per year.
$105,000 per shift.
$280,000 per shift.
$210,000 for production up to 800,000 units;
$350,000 (total) if production is over 800,000 units.
$65,000 per year.
The marketing manager tells you that the best estimate of the price of the product is $20 per unit. His best guess is that
demand could be as low as 500,000 units or as high as 750,000 units.
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