Variable Unit Costs Assignment

Alexander Co. produces a plastic courtroom set that includes a judge’s bench, witness stand, the jury box, and 25 people. The set is sold to exclusive children’s toy stores for $200. The company has the capacity to produce 20,000 sets per year. Per unit costs to produce and sell one set at that activity level follows:

Direct material cost per set                               $20

Direct labor cost per set                                    30

Variable manufacturing overhead per set                  40

Variable selling cost per set                              10

Fixed manufacturing overhead                         55                        ($1,100,000 per year)

Variable unit costs and total fixed manufacturing overhead costs are constant within the relevant range of 10,000 to 20,000 sets per year.

1. A prominent Washington D.C. store, which has not previously purchased from Alexander Co., has approached the marketing manager about buying 5,000 sets for $170 each. No selling expenses would be incurred on this offer, but the Washington D.C. store wants the set to include five plastic briefcases. This request means that Alexander Co. will incur an additional $2 variable manufacturing cost per unit, and an additional $5,000 fixed costs. The company is currently producing and selling 13,000 courtroom sets per year. What is the minimum amount per set that Alexander Co. should accept to produce the 5,000 sets?

$93? Please show work if this is correct

2. Alexander Co. has an ending finished goods inventory of 100 sets. The appropriate unit cost to use when presenting this inventory on Alexander Co's external balance sheet is: (Assume that these sets were produced in a period when the company operated at its 20,000 set capacity)

$145? Please show work if this is correct

3. Alexander Co. has 1,000 sets on hand that have some irregularities and therefore considered to be “seconds”. Due to the irregularities, it will be impossible to sell these units at normal selling price. What unit cost figure is relevant for setting a minimum selling price? (Assume that these sets were produced in a period when the company operated at its 20,000 set capacity).

$10? Please show work if this is correct. .

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