Finch Modems has excess production capacity and is considering the possibility of making and selling paging equipment. Thefollowing estimates are based on a production and sales volume of 1,600 pagers.Unit-level manufacturing costs are expected to be $26. Sales commissions will be established at $1.60 per unit. The current facility-level costs, including depreciation on manufacturing equipment ($66,000), rent on the manufacturing facility ($56,000), depreciationon the administrative equipment ($13,800), and other fixed administrative expenses ($74,950), will not be affected by the production ofthe pagers. The chief accountant has decided to allocate the facility-level costs to the existing product (modems) and to the newproduct (pagers) on the basis of the number of units of product made (i.e., 5,600 modems and 1,600 pagers).Requireda. Determine the per-unit cost of making and selling 1,600 pagers. (Do not round intermediate calculations. Round your answer to 3decimal places.)b. Assuming the pagers could be sold at a price of $40 each, should Finch make the pagers?Cost per unitb. Should Finch make the pagers?$No55.271

The following formula used to calculate total cost as follows under:-Cost per unit= (Total fixed…

Answered: Finch Modems has excess production…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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