Magnificent Modems has excess production capacity and is considering the possibility of making and selling security tokens.The following estimates are based on a production and sales volume of 1,000 security tokens. Unit-level manufacturing costs areexpected to be $20. Sales commissions will be established at $1 per unit. The current facility-level costs, including depreciation onmanufacturing equipment ($60,000), rent on the manufacturing facility ($50,000), depreciation on the administrative equipment($12,000), and other fixed administrative expenses ($71,950), will not be affected by the production of the security tokens. The chiefaccountant has decided to allocate the facility-level costs to the existing product (modems) and to the new product (security tokens) onthe basis of the number of units of product made (i.e., 5,000 modems and 1,000 security tokens).Requireda. Determine the per-unit cost of making and selling 1,000 security tokens.Note: Do not round intermediate calculations. Round your answer to 3 decimal places.b. Assuming the security tokens could be sold at a price of $34 each, should Magnificent make the security tokens?a. Cost per unitb. Should Magnificent make the security tokens?

Answer:- Cost per unit = (Total fixed costs + Total variable costs) / Total units…

Answered: Magnificent Modems has excess…

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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