A car dealership sells two types of cars: battery powered cars and conventional cars that run on gasoline. Selling one car involves 3 labour hours for a conven- tional car and 6 labour hours for an electric car. In addition, once a car is sold it needs to be ordered and once it arrives at the dealership it needs to be prepared for delivery to the new owner. The going rate for labour is $200 per hour. The table below shows the relevant data per single car of each type. Note, all costs mentioned in the table are direct costs. Car type conventional electric Price $44,000 $45,200 Cost of car from manufacturer $40,000 $40,000 Cost of sales: Labour hours $600 $1,200 Preparation of delivery $1000 $1000 Contribution margin ... ... Demand for car type per month 30 20 The car dealership has only one sales person who has to divide his time between selling electric cars or conventional cars. Each month he has 180 hours available for selling cars. He receives a salary that is based on the profit that he makes on each car he sells. General fixed overhead costs of $36,000 per month are currently allocated on the basis of sales labour hours. (a) Demonstrate that the profit per car type is $1,800. Show workings. (b) Determine the number of conventional and electric cars that the dealership needs to sell to achieve the maximum profit that the dealership can attain in one month. Show workings as well as the calculation of the maximum attainable profit.
A car dealership sells two types of cars: battery powered cars and conventional cars that run on gasoline. Selling one car involves 3 labour hours for a conven- tional car and 6 labour hours for an electric car. In addition, once a car is sold it needs to be ordered and once it arrives at the dealership it needs to be prepared for delivery to the new owner. The going rate for labour is $200 per hour. The table below shows the relevant data per single car of each type. Note, all costs mentioned in the table are direct costs. Car type conventional electric Price $44,000 $45,200 Cost of car from manufacturer $40,000 $40,000 Cost of sales: Labour hours $600 $1,200 Preparation of delivery $1000 $1000 Contribution margin ... ... Demand for car type per month 30 20 The car dealership has only one sales person who has to divide his time between selling electric cars or conventional cars. Each month he has 180 hours available for selling cars. He receives a salary that is based on the profit that he makes on each car he sells. General fixed overhead costs of $36,000 per month are currently allocated on the basis of sales labour hours. (a) Demonstrate that the profit per car type is $1,800. Show workings. (b) Determine the number of conventional and electric cars that the dealership needs to sell to achieve the maximum profit that the dealership can attain in one month. Show workings as well as the calculation of the maximum attainable profit.
A car dealership sells two types of cars: battery powered cars and conventional cars that run on gasoline. Selling one car involves 3 labour hours for a conven- tional car and 6 labour hours for an electric car. In addition, once a car is sold it needs to be ordered and once it arrives at the dealership it needs to be prepared for delivery to the new owner. The going rate for labour is $200 per hour. The table below shows the relevant data per single car of each type. Note, all costs mentioned in the table are direct costs. Car type conventional electric Price $44,000 $45,200 Cost of car from manufacturer $40,000 $40,000 Cost of sales: Labour hours $600 $1,200 Preparation of delivery $1000 $1000 Contribution margin ... ... Demand for car type per month 30 20 The car dealership has only one sales person who has to divide his time between selling electric cars or conventional cars. Each month he has 180 hours available for selling cars. He receives a salary that is based on the profit that he makes on each car he sells. General fixed overhead costs of $36,000 per month are currently allocated on the basis of sales labour hours. (a) Demonstrate that the profit per car type is $1,800. Show workings. (b) Determine the number of conventional and electric cars that the dealership needs to sell to achieve the maximum profit that the dealership can attain in one month. Show workings as well as the calculation of the maximum attainable profit.
A car dealership sells two types of cars: battery powered cars and conventional cars that run on gasoline. Selling one car involves 3 labour hours for a conven- tional car and 6 labour hours for an electric car. In addition, once a car is sold it needs to be ordered and once it arrives at the dealership it needs to be prepared for delivery to the new owner. The going rate for labour is $200 per hour.
The table below shows the relevant data per single car of each type. Note, all costs mentioned in the table are direct costs.
Car type
conventional
electric
Price
$44,000
$45,200
Cost of car from manufacturer
$40,000
$40,000
Cost of sales:
Labour hours
$600
$1,200
Preparation of delivery
$1000
$1000
Contribution margin
...
...
Demand for car type per month
30
20
The car dealership has only one sales person who has to divide his time between selling electric cars or conventional cars. Each month he has 180 hours available for selling cars. He receives a salary that is based on the profit that he makes on each car he sells. General fixed overhead costs of $36,000 per month are currently allocated on the basis of sales labour hours.
(a) Demonstrate that the profit per car type is $1,800. Show workings.
(b) Determine the number of conventional and electric cars that the dealership needs to sell to achieve the maximum profit that the dealership can attain in one month. Show workings as well as the calculation of the maximum attainable profit.
Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
