Generators inc produced emergency backup generators for use

Assignment Help Financial Accounting

Reference no: EM13355970

Generators, Inc. produced emergency backup generators for use in large commercial buildings. The costs of manufacturing and marketing the generators at the company's normal volume of 3,000 units per month are shown

Costs per Unit for Generators

Unit Manufacturing costs:
Variable Materials	$1,000
Variable Labor	1,500
Variable Overhead	500
Fixed Overhead	1,200
Total Manufacturing Cost		$4,200
Unit Marketing Costs:
Variable	500
Fixed	1,400
Total Marketing Cost		1,900
Total Unit Cost:		$6,100

The following questions refer only to the data given above. Unless otherwise stated, assume there is no connection between situations described in each of the questions, each is to be treated independently. Unless otherwise stated, a regular selling price of $7,400 per unit should be assumed.

On March 1, a contract offer is made to Redi-Watt by the federal government to supply 500 units to the Veterans Administration hospitals for delivery by March 31. Because of an unusually large number of rush orders from their regular customers, Redi-Watt plans to produce 4,000 units during March, which will use all available capacity. If the government order is accepted, 500 units normally sold to regular customers would be lost to a competitor. The contract given by the government would reimburse the government's share of March manufacturing costs (fixed and variable) plus pay a fixed fee (profit) of $500,000. There would be no variable marketing costs incurred on the government's units. What impact would accepting the government contract have on March income?

Reference no: EM13355970

Questions Cloud

Decision on proposal where contract price is lesser than : decision on proposal where contract price is lesser than variable costgenerators inc. produced emergency backup

Finding out the minimum selling price acceptable to : finding out the minimum selling price acceptable to manufacturer.generators inc. produced emergency backup generators

Calculation minimum unit price to be set to : calculation minimum unit price to be set to product.generators inc. produced emergency backup generators for use in

Generators inc produced emergency backup generators for use : generators inc. produced emergency backup generators for use in large commercial buildings. the costs of manufacturing

Impact of increase in production volume on sales cost and : impact of increase in production volume on sales cost and income.redi-watt generators inc. produced emergency backup

Findingnbsp present value ofnbsp winningsthe caldwell : findingnbsp present value ofnbsp winnings.the caldwell herald newspaper reported the following story frank ormsby of

Finding clinics required rate of returnthe atlantic medical : finding clinics required rate of returnthe atlantic medical clinic can purchase a new computer system that will save

Determine the simple rate of return on the new automated : determine the simple rate of return on the new automated bottling machine.the management of ballard microbrew is

User Account

All Pages