A-2 esMedbury Communications Systems (MCS) produces mobile radios for arctic and other harsh environments. The costs to manufacture/and market the radios at the company's normal quarterly volume of 12,000 units are shown in the following table:Unit manufacturing costsMaterials (variable)Labor (variable)Overhead (variable portion)Overhead (fixed portion)Total unit manufacturing costsUnit marketing costsVariableFixedTotal unit marketing costsTotal unit costs$ 80120409640112$ 336152$ 488Required:Assume that no connection exists among the situations described in each question below unless otherwise stated. Each isindependent. Also assume a regular selling price of $600 per unit unless otherwise stated. Ignore income taxes and other costs thatare not mentioned in the accompanying table or in the question itself.a. Market research estimates that quarterly volume could be increased to 14,000 units, which is well within production capacitylimitations if the price were cut from $600 to $525 per unit. Assuming that the cost behavior patterns implied by the data in the tableare correct.a-1. What would be the impact on quarterly sales, costs, and income?a-2. Would you recommend taking this action?b. On April 1, the federal government offers MCS a contract to supply 2,000 radios to military bases for a June 30 delivery. Because ofan unusually large number of rush orders from its regular customers, MCS plans to produce 16,000 units during the second quarter,which for MCS runs from April 1 through June 30. This level of production will use all available capacity for the quarter. If it accepts thegovernment order, MCS would lose 2,000 units normally sold to regular customers to a competitor. The government contract wouldreimburse its "share of quarterly manufacturing costs" plus pay a $90,000 fixed fee (profit). (No variable marketing costs would beincurred on the government's units.) What impact would accepting the government contract have on second quarter income? (Hint:Part of the question is to figure out the meaning of "share of quarterly manufacturing costs.")c. MCS has an opportunity to enter a highly competitive foreign market. An attraction of the foreign market is that its demand isgreatest when the domestic market's demand is quite low; thus, idle production facilities could be used without affecting domesticbusiness. An order for 4,000 radios is being sought at a below-normal price to enter this market. For this order, shipping costs will total$64 per unit; total (marketing) costs to obtain the contract will be $6,400. No other variable marketing costs would be required on thisorder, and it would not affect domestic business. What is the minimum unit price that MCS should consider for this order of 4,000radios?G₂d. An inventory of 500 units of an obsolete model of the radio remains in the stockroom. These must be sold through regular channels(thus incurring variable marketing costs) at reduced prices or the inventory will soon be valueless. What is the minimum acceptable< Prev9 of 10 ‒‒‒Next >

Fixed cost calculationFixed overhead cost=Normal capacity in units * Per unit overhead manufacturing…

Medbury Communications Systems (MCS) produces mobile radios for arctic and other harsh environments. The costs to manufacture and market the radios at the company's normal quarterly volume of 12,000 units are shown in the following table: Unit manufacturing costs Materials (variable) Labor (variable) Overhead (variable portion) Overhead (fixed portion) Total unit manufacturing costs. Unit marketing costs Variable Fixed Total unit marketing costs Total unit costs. $ 80 120 40 96 40 112 $336 152 $ 488 i G

Medbury Communications Systems (MCS) produces mobile radios for arctic and other harsh environments. The costs to manufacture and market the radios at the company's normal quarterly volume of 12,000 units are shown in the following table: Unit manufacturing costs Materials (variable) Labor (variable) Overhead (variable portion) Overhead (fixed portion) Total unit manufacturing costs. Unit marketing costs Variable Fixed Total unit marketing costs Total unit costs. $ 80 120 40 96 40 112 $336 152 $ 488 i G

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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