# Because the purchase price has increased significantly, XYZ management has asked that an estimate be made of the cost to manufacture it in its own facilities.

Anonymous

1-

The XYZ Company has purchased from ABC, Inc. 80,000 circuit boards annually.
The price has increased each year, reaching \$68 per unit last year.
Because the purchase price has increased significantly, XYZ management has asked that an estimate be made of the cost to manufacture it in its own facilities.
The company has little experience with products requiring assembly. The engineering, manufacturing, and accounting departments have prepared a report for management which included the following estimates:
An assembly run of 10,000 units.
Additional production employees would be hired to manufacture the subassembly. However, no additional equipment, space, or supervision would be needed.
The report states that total costs (1) for 10,000 units
are estimated at \$957,000
The current purchase price is \$68 a unit, so the report recommends a continued purchase of the product.
Components (outside purchases) \$120,000
Assembly labor (2) 300,000
Total costs \$957,000
(1) The cost is estimated in a relevant range of 100,000 units.
(2) Assembly labor consists of hourly production workers.
(3) Manufacturing overhead is applied to products on a direct labor dollar basis.
Variable overhead costs vary closely with direct labor dollars.
Fixed overhead 50% of direct labor dollars
Variable overhead 100% of direct labor dollars
Manufacturing overhead rate 150% of direct labor dollars
(4) General and administrative overhead is applied at 10% of the total manufacturing costs
The production cost for each circuit board produced with no learning is .

 The production cost for each circuit board produced with the 80% cumulative average learning curve is . Round your answers only to the nearest dollar with no \$ sign or period.

2-

Consider the following:
Product Sales Price Variable Production Cost Allocated fixed manufacturing overhead
X \$40 12 36363.64
Y \$60 30 21818.18
Z \$92 55 21818.18
The sales ratio for X:Y:Z is 10:6:6
Total current sales (units) 16000
Additionally, average cost data for two levels of sales volume are as follows:
Sales Volume (units) 10,000 30000
Administration Expense (per unit) \$18 6
Sales & Marketing (per unit) \$12 12
Other Operating Expense \$2.40 1.8
X company is subject to a 40% income tax rate.
X company’s current margin of safety is
How many units of Product Y does ABC need to sell to earn a after-tax income of \$48,000
Round your answers only to the nearest dollar and units with no \$ sign, comma and period.
3-

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