Hi-Tech is the creator of Y-Go, a technology that weaves silver into the fabric to kill bacteria and odour on clothing while managing heat. Y-GO has become very popular in undergarments for sports activities. Operating at capacity, Hi-Tech can produce 500,000 undergarments each year. The normal selling price is $10 per unit. The per unit cost for each unit is as follows: Per unit Direct materials $2.00 Direct labour 0.50 Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses 1.00 1.25 0.25 The Canadian armed forces (CAF) has approached Hi Tech and expressed an interest in purchasing 75,000 Y-GO undergarments for soldiers stationed in hot climates.
Hi-Tech is the creator of Y-Go, a technology that weaves silver into the fabric to kill bacteria and odour on clothing while managing heat. Y-GO has become very popular in undergarments for sports activities. Operating at capacity, Hi-Tech can produce 500,000 undergarments each year. The normal selling price is $10 per unit. The per unit cost for each unit is as follows: Per unit Direct materials $2.00 Direct labour 0.50 Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses 1.00 1.25 0.25 The Canadian armed forces (CAF) has approached Hi Tech and expressed an interest in purchasing 75,000 Y-GO undergarments for soldiers stationed in hot climates.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints
Section: Chapter Questions
Problem 16E
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Transcribed Image Text:Problem B
Hi-Tech is the creator of Y-Go, a technology that weaves silver into the fabric to kill bacteria and odour on
clothing while managing heat. Y-GO has become very popular in undergarments for sports activities.
Operating at capacity, Hi-Tech can produce 500,000 undergarments each year. The normal selling price is
$10 per unit. The per unit cost for each unit is as follows:
Per unit
Direct materials
$2.00
Direct labour
0.50
Variable manufacturing overhead
Fixed manufacturing overhead
Variable selling expenses
1.25
0.25
The Canadian armed forces (CAF) has approached Hi Tech and expressed an interest in purchasing 75,000
Y-GO undergarments for soldiers stationed in hot climates.
Required:
To answer a, b, and c, use the minimum price model:
Minimum price model
Variable cost
XX
Plus: Lost CM on regular sales
Equals Total minimum price (TMP)
XX
XX
Unit price (TMP/ units in special order)
a) If Hi-Tech is operating at 100% capacity what is the minimum price to charge?
b) If Hi- Tech is operating at 90% capacity what is the minimum price to charge?
If Hi-Tech is operating at 70% capacity what is the minimum price to charge?
d) Assume High Tech is operating at 90% capacity and Hi-tech receives a special order from the CAF
for 75,000 Y-Gos at a selling price of $8.00 per unit. Compute the increase in profit (or loss) if High
Tech accepts the order.
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