Marquette receives a proposal from an outside contractor who offers to make and ship 1,500 fences directly to Marquette’s customers as orders arrive from Marquette’s sales force. When managers meet to discuss this proposal, Product Manager Will Hansen brings up the fact that they have the design for an electric fence that can be used for large animals that has never been produced. Will suggests that this may be the perfect time to launch this new product and at a selling price of $225 per unit it is sure to increase sales revenue. The production manager calculates that the idle time created by accepting the contractors offer would allow them to produce 1,000 of the new fence. The cost to produce the new fence would be $175 in variable manufacturing expense but fixed manufacturing and marketing costs would remain unchanged. The product mix would now be 1,000 of the new fence and 1,500 of the old fence. If Marquette wants to seriously consider taking the contractors offer, what in-house cost should be used to evaluate the outside contractor’s bid. If the payment to the outside contractor is $90 per unit, should they accept the offer? Why or why not? (Show all supporting calculations).(NOTE: ignore taxes or other costs not specifically mentioned in the questions.) Marquette Manufacturing produces "invisible" electric dog fences, sold through retail locations nationwide. Theselling price of the fence is $150 per unit. The cost to manufacture and market the fences is shown below.These figures represent the cost at the company's normal volume of 3,000 units per month.Unit Manufacturing CostsVariable materials $ 15.00Variable labor$ 17.50Variable overhead $ 12.50Fixed overhead$ 16.00Total unit manufacturing costs$ 61.00Unit Marketing CostsVariable$12.00Fixed overhead$17.00Total unit marketing costs2$29.00Total unit costs$ 90.00

Fixed overheads are incurred in the day to day operations but are not allocated directly to any…

Answered: If the payment to the outside…

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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Marquette receives a proposal from an outside contractor who offers to make and ship 1,500 fences directly to Marquette’s customers as orders arrive from Marquette’s sales force. When managers meet to discuss this proposal, Product Manager Will Hansen brings up the fact that they have the design for an electric fence that can be used for large animals that has never been produced. Will suggests that this may be the perfect time to launch this new product and at a selling price of $225 per unit it is sure to increase sales revenue. The production manager calculates that the idle time created by accepting the contractors offer would allow them to produce 1,000 of the new fence. The cost to produce the new fence would be $175 in variable manufacturing expense but fixed manufacturing and marketing costs would remain unchanged. The product mix would now be 1,000 of the new fence and 1,500 of the old fence. If Marquette wants to seriously consider taking the contractors offer, what in-house cost should be used to evaluate the outside contractor’s bid. If the payment to the outside contractor is $90 per unit, should they accept the offer? Why or why not? (Show all supporting calculations).

(NOTE: ignore taxes or other costs not specifically mentioned in the questions.)

Marquette Manufacturing produces "invisible" electric dog fences, sold through retail locations nationwide. The
selling price of the fence is $150 per unit. The cost to manufacture and market the fences is shown below.
These figures represent the cost at the company's normal volume of 3,000 units per month.
Unit Manufacturing Costs
Variable materials $ 15.00
Variable labor
$ 17.50
Variable overhead $ 12.50
Fixed overhead
$ 16.00
Total unit manufacturing costs
$ 61.00
Unit Marketing Costs
Variable
$
12.00
Fixed overhead
$
17.00
Total unit marketing costs
2$
29.00
Total unit costs
$ 90.00

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