Case 18-1 Huron Automotive Company
Question No 7.
Assuming the facts of question no 6. Except that the idle facilities to be used to produce 800 modified hydraulic hoist/month.
Sale Price - $4950 each.
Variable Mfg Cost - $3025/unit
Variable Markt Cost - $550/unit
Fixed Mfg O/H and Marketing cost remains unchanged
What is the maximum price paid to the contractor?? Should the contract be accepted for a price of $ 2475/unit to the contractor??
Solution:
Particulars. | 3000 Hoists | Contract for 1000 outsourced hoist Production of 800 modified Hoists Production of 2000 regular hoists | | Produced | | | In-House | | | | For 2000 units | For 1000 units | For 800 units | Total | Revenue | 3000*4350= $1,30,50,000 | 2000*4350= $87,00,000 | 1000*4350= $43,50,000 | 800*4950= $39,60,000 | $ 1,70,10,000 | Variable Mfg cost | 3000*1795=($ 53,85,000) | 2000*1795= ($35,90,000) | - | 800*3025=$(24,20,000) | ($ 60,10,000) | Variable Mrktg Cost | 3000*275= $ (8,25,000) | 2000*275= ($ 5,50,000) | 220*1000 = ($ 2,20,000) | 550*800= $(4,40,000) | ($ 12,10,000) | Contribution | $ 68,40,000 | $ 45,60,000 | $ 41,30,000 | $ 11,00,000 | $97,90,000 | Fixed Mfg Cost | ($19,80,000) | | | | ($19,80,000) | Fixed Mrktg Cost | ($23,10,000) | | | | ($23,10,000) | Income | $ 25,50,000 | | | | $55,00,000 – X | Let the amount paid to contractor be ‘X’
Payment to be done $25,50,000 = $55,00,000 - X X = $55,00,000 - $25,50,000 $ 29,50,000 which is $2950/unit. The proposal should be accepted for a price of $ 2475/unit to the
Assuming the facts of question no 6. Except that the idle facilities to be used to produce 800 modified hydraulic hoist/month.
Sale Price - $4950 each.
Variable Mfg Cost - $3025/unit
Variable Markt Cost - $550/unit
Fixed Mfg O/H and Marketing cost remains unchanged
What is the maximum price paid to the contractor?? Should the contract be accepted for a price of $ 2475/unit to the contractor??
Solution:
Particulars. | 3000 Hoists | Contract for 1000 outsourced hoist Production of 800 modified Hoists Production of 2000 regular hoists | | Produced | | | In-House | | | | For 2000 units | For 1000 units | For 800 units | Total | Revenue | 3000*4350= $1,30,50,000 | 2000*4350= $87,00,000 | 1000*4350= $43,50,000 | 800*4950= $39,60,000 | $ 1,70,10,000 | Variable Mfg cost | 3000*1795=($ 53,85,000) | 2000*1795= ($35,90,000) | - | 800*3025=$(24,20,000) | ($ 60,10,000) | Variable Mrktg Cost | 3000*275= $ (8,25,000) | 2000*275= ($ 5,50,000) | 220*1000 = ($ 2,20,000) | 550*800= $(4,40,000) | ($ 12,10,000) | Contribution | $ 68,40,000 | $ 45,60,000 | $ 41,30,000 | $ 11,00,000 | $97,90,000 | Fixed Mfg Cost | ($19,80,000) | | | | ($19,80,000) | Fixed Mrktg Cost | ($23,10,000) | | | | ($23,10,000) | Income | $ 25,50,000 | | | | $55,00,000 – X | Let the amount paid to contractor be ‘X’
Payment to be done $25,50,000 = $55,00,000 - X X = $55,00,000 - $25,50,000 $ 29,50,000 which is $2950/unit. The proposal should be accepted for a price of $ 2475/unit to the