Magneficent modems has excess productuction capacity

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Reference no: EM131260153

latemir company expects to make 7200 travel sewing kits in 2015. In january the company made 1800 kits. material and labor cost for january eas 7200 and 9000 respectively. in february they produced 2200 kits material and labor costs were 8800 and 11000 respectively. the company paid 144000 for annual factory insurance on january 102015. ignore other manufacturing overhead costs.

A. assuming latimer desires to sell its sewing kits for 20% of cost what price should it charge for kits produced in january and february.

Part b.

oigly company makes two products from soybeans , cooking oil and cattle feed.from a 100000 batch of soybeans they produce 20000 pounds of cooking oil and 80000 pounds of feed. producing a standard batch costs them 27000 the sales prices are $3 per pound for cooking oil and $1.50 for feed.

a. allocate the joint product cost to the two products using weight and allocation base

b. allocate the joint product cost to the two products using market value as allocation base.

Part c.

Magneficent modems has excess productuction capacity and is considering the possibility of making and selling paging equipment. The following esimates are based on a production and sales volume of 1000 pagers. Unit levels manufacturing costs are expected to be $20. sales commissions will be established at $1 per unit. the current facility level costs including depreciation on manufacturing equipment (60000) rent on the manufacturing facilities (50000) depreciation on the administrative equipment (12000) and other fixed administrative expenses (71950) will not be affected by the production of the pagers. the chief accountant has decided to allocate the facility level costs to excisting products (modems) and to the new product ( pagers) on the basis of the number of unit product made ( i.e 5000 modems and 1000 pagers)

a. determine the per unit cost of making the selling 1000 pagers

b. assuming the pagers could be sold at a price of $34 each should magnificent make the pagers ?

c. comment on the validity of the number of units as an allocation base.

Reference no: EM131260153

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