Homework Answers
a. total fixed cost in manufacturing pagers and modems
=62000 + 52000 + 12600 + 72950 = $199,550
cost to be allocated to (5200 + 1200) devices
fixed cost allocation per device= 199550 / 6400 = $31.1796 per device
unit level manufacturing and selling cost is $23.20 (22+1.2)
total per unit cost for manufacturing pagers is $54.380
since the CA decided to allocate facility level fixed cost to both devices, per unit facility cost will be added to the total cost of manufacturing pagers
b. though the selling price per pager is less than the cost per unit of pager, but pagers are manufactured on the excess capacity of the production and also unit level cost and selling cost per unit is less than the selling price, the company should sell the pagers at the given price
54.380 > 36 but excess production capacity is utilised which otherwise would have been wasted
and 23.20 < 36 that means no loss in making pagers
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