Corrigan Enterprises is studying the acquisition of two electrical component insertion systems for producing its sole product, the universal gismo. Data relevant to the systems follow. Model no. 6754: Variable costs, $16.00 per unit Annual fixed costs, $985,900 Model no. 4399: Variable costs, $11.80 per unit Annual fixed costs, $1,113,700 Corrigan’s selling price is $64 per unit for the universal gismo, which is subject to a 15 percent sales commission. (In the following requirements, ignore income taxes.) 2A. Calculate the net income of the two systems if sales and production are expected to average 46,000 units per year. 3. Assume Model 4399 requires the purchase of additional equipment that is not reflected in the preceding figures. The equipment will cost $440,000 and will be depreciated over a five-year life by the straight-line method. How many units must Corrigan sell to earn $965,000 of income if Model 4399 is selected? As in requirement 2, sales and production are expected to average 46,000 units per year. (Do not round intermediate calculations and round your final answer up to nearest whole number.) 4. Ignoring the information presented in part 3, at what volume level will the annual total cost of each system be equal? (Do not round intermediate calculations and round your final answer up to nearest whole number.)

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter6: Process Cost Accounting—additional Procedures; Accounting For Joint Products And By-products

Section: Chapter Questions

Problem 13P: Venezuela Oil Inc. transports crude oil to its refinery where it is processed into main products...

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Corrigan Enterprises is studying the acquisition of two electrical component insertion systems for producing its sole product, the universal gismo. Data relevant to the systems follow.

Model no. 6754:
	Variable costs, $16.00 per unit
	Annual fixed costs, $985,900

Model no. 4399:
	Variable costs, $11.80 per unit
	Annual fixed costs, $1,113,700

Corrigan’s selling price is $64 per unit for the universal gismo, which is subject to a 15 percent sales commission. (In the following requirements, ignore income taxes.)

2A. Calculate the net income of the two systems if sales and production are expected to average 46,000 units per year.

3. Assume Model 4399 requires the purchase of additional equipment that is not reflected in the preceding figures. The equipment will cost $440,000 and will be depreciated over a five-year life by the straight-line method. How many units must Corrigan sell to earn $965,000 of income if Model 4399 is selected? As in requirement 2, sales and production are expected to average 46,000 units per year. (Do not round intermediate calculations and round your final answer up to nearest whole number.)

4. Ignoring the information presented in part 3, at what volume level will the annual total cost of each system be equal? (Do not round intermediate calculations and round your final answer up to nearest whole number.)

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