Problem three You are the general manager of a firm that manufactures personal computers. Due to a soft economy, demand for PCs has dropped 50 percent from the previous year. The sales manager of your company has identified only one potential client, who has received several quotes for 10,000 new PCs. According to the sales manager, the client is willing to pay $800 each for 10,000 new PCs. Your production line is currently idle, so you can easily produce the 10,000 units. The accounting department has provided you with the following information about the unit (or average) cost of producing three potential quantities of PCs: Materials (PC component) Depreciation Labor Total unit cost 10,000 PCs $600 300 150 $1,050 15,000 PCs $600 225 150 $975 20,000 PCs $600 150 150 $900 Based on this information, should you accept the offer to produce 10,000 PCs at $800 each? Explain.

Problem three You are the general manager of a firm that manufactures personal computers. Due to a soft economy, demand for PCs has dropped 50 percent from the previous year. The sales manager of your company has identified only one potential client, who has received several quotes for 10,000 new PCs. According to the sales manager, the client is willing to pay $800 each for 10,000 new PCs. Your production line is currently idle, so you can easily produce the 10,000 units. The accounting department has provided you with the following information about the unit (or average) cost of producing three potential quantities of PCs: Materials (PC component) Depreciation Labor Total unit cost 10,000 PCs $600 300 150 $1,050 15,000 PCs $600 225 150 $975 20,000 PCs $600 150 150 $900 Based on this information, should you accept the offer to produce 10,000 PCs at $800 each? Explain.

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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