Question

The Goal OneGoal One Company manufactures windows. Its manufacturing plant has the capacity to produce 11,000 windows each month. Current production and sales are 10,000 windows per month. The company normally charges $250 per window.

Cost information Variable costs that vary with number of units produced Direct materials 400,000 Direct manufacturing labour 350,000 Variable costs (for setups, materials handling, quality control, and so on) that vary with number of batches, 50 batches x $800 per batch 40,000 Fixed manufacturing costs 125,000 150,000 Fixed marketing costs 1,065,000 Total costs Print Done %24

Answer 1

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One Goal
Variable cost per unit	Per Unit	Amount $
Units	10,000.00
Materials	400,000.00	40.00	This is $ 400,000 / 10,000 units.
Labor	350,000.00	35.00	This is $ 350,000 / 10,000 units.
Cost of additional 1,000 units.	Per Unit	Amount
Units	1,000.00
Sales revenue	200.00	200,000.00	This is 1,000 units $ sell price per unit i.e. $ 200.
Materials	40.00	40,000.00	This is 1,000 units $ Materials cost per unit i.e. $ 40.
Labor	35.00	35,000.00	This is 1,000 units $ Labor cost per unit i.e. $ 35.
Variable cost		4,000.00	This is 8 batches* $ 500 per batch.
Income Statement
Units sold	1,000.00
Sales revenue	200,000.00
Less: Variable costs
Materials	40,000.00
Labor	35,000.00
Variable cost	4,000.00
Total Variable costs	79,000.00
Contribution	121,000.00
Final Answer
The Company will gain $121,000 if it accepts the offer. So the offer should be accepted.
Fixed cost are sunk cost and irrelevant to this offer so not considered.
Requirement 2
Capacity of company	10,500.00
Less: Units to be sold under special offer	1,000.00
Capacity remaining	9,500.00
Less: Normal demand	10,000.00
Normal demand lost due to special offer	500.00
Calculation of contribution lost on 500 units
	Per Unit	Amount
Units	500.00
Sales revenue	250.00	250,000.00	This is 1,000 units $ sell price per unit i.e. $ 250.
Less:
Materials	40.00	40,000.00	This is 1,000 units $ Materials cost per unit i.e. $ 40.
Labor	35.00	35,000.00	This is 1,000 units $ Labor cost per unit i.e. $ 35.
Variable cost		1,500.00	This is 3 batches* $ 500 per batch.
Contribution lost		173,500.00
Contribution from special offer		121,000.00
Incremental loss		52,500.00
The Company will lose $52,500 if it accepts the offer. So the offer should not be accepted.
Fixed cost are sunk cost and irrelevant to this offer so not considered.
Requirement 3
Number of units sold to regular customers	10,000.00
Price discount	20.00
Total discount	200,000.00
Contribution from special offer	173,500.00
Incremental loss	26,500.00
The Company will lose $ 26,500 if it accepts the offer. So the offer should not be accepted.
Fixed cost are sunk cost and irrelevant to this offer so not considered.