Cosi Ltd produces and sells a single product, a fan called a tutte. Annual production capacity is 100,000 machine hours. Annual demand for tuttes is 80,000 fans. The selling price is expected to remain at £12 per fan. Cost data for producing and selling tuttes are as follows: Variable costs (per unit) Direct materials, labour and overhead Selling costs Fixed costs (per year) Fixed production costs Fixed selling costs £ 5.10 1.80 £ 69,000 40,000 Cosi Ltd has 2,000 tuttes in inventory that were incorrectly painted. The company has two choices: 1. sell these lower quality fans through the normal distribution channels at a reduced price or 2. scrap them at a net cost of zero. Sales of these lower quality fans are not expected to affect regular sales of tuttes. Price Required: Determine and justify the minimum price per fan that would have to be received in order to make it worthwhile selling the lower quality fans rather than scrapping them. (Round your answer to 2 decimal places.) per fan
Cosi Ltd produces and sells a single product, a fan called a tutte. Annual production capacity is 100,000 machine hours. Annual demand for tuttes is 80,000 fans. The selling price is expected to remain at £12 per fan. Cost data for producing and selling tuttes are as follows: Variable costs (per unit) Direct materials, labour and overhead Selling costs Fixed costs (per year) Fixed production costs Fixed selling costs £ 5.10 1.80 £ 69,000 40,000 Cosi Ltd has 2,000 tuttes in inventory that were incorrectly painted. The company has two choices: 1. sell these lower quality fans through the normal distribution channels at a reduced price or 2. scrap them at a net cost of zero. Sales of these lower quality fans are not expected to affect regular sales of tuttes. Price Required: Determine and justify the minimum price per fan that would have to be received in order to make it worthwhile selling the lower quality fans rather than scrapping them. (Round your answer to 2 decimal places.) per fan
Chapter3: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 6PA: Morris Industries manufactures and sells three products (AA, BB, and CC). The sales price and unit...
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