Question : 11) If Mr. Gladstone wanted a long-term commitment for supplying : 1186003

 

11) If Mr. Gladstone wanted a long-term commitment for supplying this product, what price would most likely be quoted to him?

A) $1,000

B) $1,200

C) $1,290

D) $1,400

E) $1,075

 

Answer the following question(s) using the information below.

 

Welch Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. Welch Manufacturing has a policy of adding a 10% markup to full costs and currently has excess capacity. The following per unit data apply for sales to regular customers:

 

Variable costs:

 

       Direct materials

$30

       Direct labour

10

       Manufacturing overhead

15

       Marketing costs

5

Fixed costs:

 

       Manufacturing overhead

100

       Marketing costs

   20

Total costs

180

Markup (10%)

   18

Estimated selling price

$198

 

12) For Welch Manufacturing, what is the minimum acceptable price of this one-time-only special order?

A) $40

B) $55

C) $60

D) $66

E) $86

13) What is the full cost of the product per unit?

A) $60

B) $180

C) $198

D) $66

E) $155

 

14) If the European customer wanted a long-term commitment for supplying this product, what price would most likely be quoted?

A) $66

B) $180

C) $155

D) $217

E) $198

 

15) Schlickau Company manufactures basketball backboards. The following information pertains to the

company’s normal operations per month:

 

Output units15,000 boards

Machine-hours4,000 hours

Direct manufacturing labour-hours5,000 hours

 

Direct manufacturing labour per hour$12

Direct materials per unit$100

Variable manufacturing overhead costs$150,000

Fixed manufacturing overhead costs $300,000

Product and process design costs$200,000

Marketing and distribution costs$250,000

 

Required:

a.For long-run pricing, what is the full-cost base per unit?

b.Schlickau Company is approached by an overseas city to fulfill a one-time-only special order for 1,000 units. All cost relationships remain the same except for an additional one-time setup charge of $40,000. No additional design, marketing, or distribution costs will be incurred. What is the minimum acceptable bid per unit on this one-time-only special order?

 

16) Muskoka Travel offers guided tours through the lake system. Muskoka Travel provides a guide, necessary equipment, and food for a fee of $75 per person per day. Currently the company is providing an average of 600 guide-days per month. Based on available equipment and guides the maximum capacity is 950 guide-days (customers taken on the equivalent of an all day tour) per month.

 

Variable costs per guide-day for the year were as follows:

 

Food$7.50Guide’s salary$37.50

Supplies3.00Insurance12.00

 

Fixed costs per month during the year were as follows:

 

Equipment rental$7,500Marketing$3,000

Administration6,000Customer service1,500

 

Required:

A group of foreign tourists has offered Muskoka Travel a proposal of 300 guide-days in July if they will cut the fee to $67.50 per guide-day. They have their own food and do not want to use the Muskoka Travel menus. Muskoka Travel will incur $300 in additional costs for busing the tourists back and forth to the camp site. If fixed costs would not increase, should Muskoka Travel accept the special offer?