Question

Davis Kitchen Supply produces stoves for commercial kitchens. The costs to manufacture and market the stoves at the company's normal volume of 6,000 units per month are shown in the following table. $ 58 83 33 68 Unit manufacturing costs Variable materials Variable labor Variable overhead Fixed overhead Total unit manufacturing costs Unit marketing costs Variable Fixed Total unit marketing costs Total unit costs $ 242 33 78 111 $ 353 Unless otherwise stated, assume that no connection exists between the situation described in each question; each is independent. Unless otherwise stated, assume a regular selling price of $386 per unit. Ignore income taxes and other costs that are not mentioned in the table or in the question itself.

Answer 1

Solution c:
Minimum Unit Price For the Foreign Market
Variable Manufacturing cost (58+83+33)	174
Shipping cost per unit	48
Marketing Costs ($2000/2000)	1
Minimum Unit price	223
Solution d:
Minimum Selling Price =	Variable Marketing cost =	33
Solution e-1:
Variable marketing cost ($33*15%*2000)	9900
Fixed Manufacturing costs ($68*6000*15%)	61200
Variable Manufacturing cost [(58+83+33)*2000]	348000
Total In house cost savings	419100
Units	2000
In House cost saving per unit	209.55
Solution e-2:
Price to Outside contractor	223.00
Savings per unit (Total Inhouse savings/ 2000 units)	209.55
Should Proposal be accepted	Not accepted
Solution f-1:
Variable marketing cost ($33*15%*2000)	9900
Variable Manufacturing cost [(58+83+33)*2000]	348000
Contribution from modified Stove [(458-283-58)*1600]	187200
Total In house cost savings	545100
Units	2000
In House cost saving per unit	272.55
Solution f-2:
Price to Outside contractor	223.00
Savings per unit (Total Inhouse savings/ 2000 units)	272.55
Should Proposal be accepted	Accepted