Laurel Supply Company PSA
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School
California State University, Northridge *
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Course
425A
Subject
Industrial Engineering
Date
Dec 6, 2023
Type
xlsx
Pages
3
Uploaded by ConstableKoupreyMaster5580
Selling price
...................................................................................
$400
per unit
Direct materials
..............................................................................
$135
per unit
Direct labor
.....................................................................................
$45
per unit
Variable manufacturing overhead (MOH)
.....................................
$40
per unit
Total fixed MOH
............................................................................
$1,600,000
Variable selling and administrative
................................................
$30
per unit
Total fixed selling and administrative
............................................
$500,000
Sales volume
..................................................................................
25,000
units
12000
What is the contribution margin and the contribution margin ratio for this product?
Second year
Revenues
$400
Less variables Costs
Variable manufacturing ($135 + $45 + $40)
$220
Variable Selling and Adm. ( $30)
$30
Contribution Margen
$150
0.375
Laurel Supply Company makes specialized products for automobile applications. Recently management introduced
engine sensor device. The first year costs and revenues for the product were as follows:
During the second year of production and sales, the company only sold 12,000 units of
product, because a competitor produced and sold an identical product. Laurel Supply
has filed a lawsuit against the competitor for patent infringement.
Assume the competitor is liable as alleged by Laurel Supply in the patent infringement lawsuit. Additionally
assume that in the second year of operations all variable manufacturing costs increased by 10 percent and
all fixed costs increased by 15 percent and the selling price remained the same. What is the amount of
damages that Laurel Supply experienced during the second year of the new product as a result of the
competitor's patent infringement?
Revenues
Sales = 13,000 units × $400 =
$5,200,000
Less
Costs ( Increased by 15% and 10%)
Variable manufacturing = 13,000 unit × ($148.5 + $49.5 + $44) =
($3,146,000)
Variable Selling and Adm. (13,000 units × $30)
($390,000)
Contribution Margen - Second Year
$1,664,000
Revenues
Second year
Sales = 13,000 units × $400 =
$5,200,000
Less Costs
Variable manufacturing = 13,000 unit × ($135 + $45 + $40) =
($2,860,000)
Variable Selling and Adm. (13,000 units × $30)
($390,000)
Contribution Margen - Second Year
$1,950,000
Assume the competitor is liable as alleged by Laurel Supply in the patent infringement lawsuit. What is the
amount of damages that Laurel Supply experienced during the second year of the new product as a result of
the competitor's patent infringement?
Increase
10%
$148.50
10%
$49.50
10%
$44.00
15% $1,840,000
$30
$500,000
13000
d a new patented
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