What impact would accepting government contract

Assignment Help Financial Accounting

Reference no: EM1311582

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: EM1311582

Questions Cloud

Find minimum unit price to be set to product : Domestic business would be unaffected by this order. What is the minimum unit price Redi-Watt should consider for this order of 1,000 units - Find minimum unit price to be set to product.

What is the equilibrium temperature of this system : A massless rod of length 1m has a 2.00 kg mass attached to one end and a 3 kg mass attached to the other. The system rotates about a fixed axis perpendicular to the rod that passes through the rod 30.0 cm from the end with the 3kg mass attached. The ..

Computation of profit maximizing level of output : In 1991, Brazil and Columbia united to form a coffee cartel and reduce coffee output. Suppose total costs for the cartel are:

Find the smallest particle size : Find the smallest particle size (density 2.65 grams per cubic cm) that will be removed in a horizontal grit chamber 10 meters long and 1.0 meter deep if the flow rate is 1000 cubic meters per hour. Suppose temperature is 25 ºC.

What impact would accepting government contract : There would be no variable marketing costs incurred on the government's units and show What impact would accepting the government contract have on March income?

Formulating the hypotheses : Formulate the hypotheses that can be used to determine whether union membership increased in 2006.

Suppose the same static friction coefficient : A uniform plank of length 5.8m and weight 229N rests horizontally on two supports, with 1.10 m of the plank hanging over the right support (see the drawing). To what distance x can a person who weighs 450N walk on the overhanging part of the plank be..

Computing percent of trucks logged or travelled : What percent of trucks logged more than 57,060 but less than 58,280 miles? What percent of Fords travelled 62,000 miles or less in the year?

Computing marginal and average product of labor : Suppose that a chair manufacturer is producing in the short run (with its existing plant and equipment). The manufacturer has observed the following levels of production corresponding to different numbers of workers:

User Account

All Pages