Reference no: EM132996320
RCT Engines Company produces the same power generators in two plants, a newly renovated, automated plant in Cavite, and an older, less automated plant in Abra. The following data are available for two plants:
Cavite
Selling price $150.00
Variable manufacturing cost per unit $72.00
Fixed manufacturing cost per unit 30.00
Variable marketing and distribution cost per unit 14.00
Fixed marketing and distribution cost per unit 19.00
Total cost per unit 135.00
Operating income per unit 15.00
Production rate per day 400 units
Normal annual capacity usage 240 days
Maximum annual capacity 300 days
Abra
Selling price $150.00
Variable manufacturing cost per unit $88.00
Fixed manufacturing cost per unit15.00
Variable marketing and distribution cost per unit 14.00
Fixed marketing and distribution cost per unit 14.50
Total cost per unit 131.50
Operating income per unit 18.50
Production rate per day 320 units
Normal annual capacity usage 240 days
Maximum annual capacity 300 days
- All unit fixed costs are calculated based on a normal year of 240 working days. When the number of working days exceeds 240, variable manufacturing costs increase by $3.00 per unit in Cavite and $8.00 per unit in Abra.
- RCT Engines is expected to produce and sell 192,000 generators during the coming year. Wanting to maximize the higher unit profit at Abra, RCT Engines's production manager has decided to manufacture 96,000 units at each plant. This production plan results in Abra operating at capacity (320 units per day 300 days) and Cavite operating at its normal volume (400 units per day 240 days).
Required:
Problem 1: Determine the breakeven point for the Cavite and Abra plants in units.
Problem 2: Calculate the operating income that would result from the division production manager's plant to produce 96,000 units at each plant.
Problem 3: Determine how the production of the 190,000 units should be allocated between Cavite and Abra to maximize operating income for RCT Engines. Show your calculation.
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