Reference no: EM132516296

Fish Tracker Corporation manufactures and sells 1,000 outboard motors each month. A primary component in each motor is a water pump used to keep the motor from overheating. Fish Tracker has the monthly capacity to produce 1,500 water pumps. The variable costs associated with manufacturing each pump are shown below:

Direct materials                        $15

Direct Labor                             10

Variable manufacturing overhead    20

• Fixed manufacturing overhead per month (for up to 1,500 units of production) averages $18,000. Bass Master, Inc., has offered to purchase 250 water pumps from Fish Tracker per month to be used in its own outboard motors.

Question 1: Refer to the information above. If Bass Master's order is rejected, what will be Fish Tracker's average unit cost of manufacturing each water pump?

a. $63.

b. $45.

c. $57.

d. $59.40.

Question 2: Refer to the information above. What is the incremental cost of producing each additional water pump?

a. $63.

b. $45.

c. $57.

d. $59.40.

Question 3: Refer to the information above. Assuming Fish Tracker wants to earn a pretax profit of $8,000 on this special order, what price must it charge Bass Master?

a. $95.

b. $77.

c. $89.

d. $57.