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The Zulu Company has a maximum production capacity of 40,000 units per year. For that capacity level, fixed costs are $300,000 per year. Variable costs per unit are $50. In the coming year, the company has orders for 44,000 units at $85. The company wants to make a minimum overall operating income of $170,000 on these 44,000 units. Requirement What maximum unit purchase price would Zulu Company be willing to pay to a subcontractor for the additional 4,000 units it cannot manufacture itself to earn an operating income of $170,000? 1. Identify the total cost to Zulu Company to manufacture 40,000 units. Total costs to manufacture 40,000 units

The Zulu Company has a maximum production capacity of 40,000 units per year. For that capacity level, fixed costs are $300,000 per year. Variable costs per unit are $50. In the coming year, the company has orders for 44,000 units at $85. The company wants to make a minimum overall operating income of $170,000 on these 44,000 units. Requirement What maximum unit purchase price would Zulu Company be willing to pay to a subcontractor for the additional 4,000 units it cannot manufacture itself to earn an operating income of $170,000? 1. Identify the total cost to Zulu Company to manufacture 40,000 units. Total costs to manufacture 40,000 units

FINANCIAL ACCOUNTING
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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The Zulu Company has a maximum production capacity of 40,000 units per year. For that capacity level, fixed costs are $300,000 per year. Variable costs per unit are $50. In the coming year, the company has orders for 44,000 units at $85. The company wants to make a minimum overall operating income of $170,000 on these 44,000 units. Requirement What maximum unit purchase price would Zulu Company be willing to pay to a subcontractor for the additional 4,000 units it cannot manufacture itself to earn an operating income of $170,000? 1. Identify the total cost to Zulu Company to manufacture 40,000 units. Total costs to manufacture 40,000 units
Transcribed Image Text:The Zulu Company has a maximum production capacity of 40,000 units per year. For that capacity level, fixed costs are $300,000 per year. Variable costs per unit are $50. In the coming year, the company has orders for 44,000 units at $85. The company wants to make a minimum overall operating income of $170,000 on these 44,000 units. Requirement What maximum unit purchase price would Zulu Company be willing to pay to a subcontractor for the additional 4,000 units it cannot manufacture itself to earn an operating income of $170,000? 1. Identify the total cost to Zulu Company to manufacture 40,000 units. Total costs to manufacture 40,000 units
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