Question

Unter Components manufactures low-cost navigation systems for installation in ride-sharing cars. It sells these systems to various car services that can customize them for their locale and business model. It manufactures two systems, the Star100 and the Star150, which differ in terms of capabilities. The following information is available. Starse $ 75 Costs per Unit Stariee Direct materials $ 65 Direct labor Variable 15 Overhead Fixed overhead 90 Total cost per $ 200 unit Price Units sold 4,888 $ 255 3290 2.800 The average wage rate is $20 per hour. Variable overhead varies with the quantity of direct labor-hours The plant hos o capacity of 20,000 direct labor-hours, but current production uses only 10,000 direct labor hours Required: a. A nationwide car-sharing service has offered to buy 2.500 Star100 systems and 2,500 Star150 systems if the price is lowered to $200 and $250, respectively. per unit. |-1. Unter accepts the offer, how many direct labor-hours will be required to produce the additional systems? 3-2. Complete the following table to determine the differential profit increase or decrease) if Unter accepts this proposal. Prices on regular sales will remain the same. b-1. Suppose that the car sharing has offered instead to buy 3.500 each of the two models at $200 and $250, respectively. This customer will purchase the 3.500 units of each model only in an all-or-nothing deal That is. Unter must provide all 3,500 units of each model or none. Unter's management has decided to fill the entire special order for both models. In view of its capacity constraints, Unter will reduce sales to regular customers os needed to fill the special order. Complete the table below to determine the total contribution margin with the special order added. b-2. How much will the profits change if the order is accepted? Assume that the company cannot increase its production capacity to meet the extra demand. -1. Assume that in the situation presented in requirement b-1, the plant can work overtime. Direct labor costs for the overtime production increased to $30.00 per hour. Variable overhead costs for overtime production are $5 per hour more than for normal production. Complete the table below to determine the total contribution margin c-2. How much will the profits change in this situation? Complete this question by entering your answers in the tabs below. A nationwide car sharing service has offered to buy 2.500 Star100 systems and 2.500 Star150 systems if the price is lowered to $200 a $250, respectively, per unit AL. Unter acepts the offer, how many direct isbor-hours will be required to produce the additional systems?

Answer 1

Total Answer c 1 Revised labor cost Direct Labor hour per unit Wages per hour Wages per unit Star 100 1.50 30.00 45.00 Star 150 2.00 30.00 60.00 $ 20+ $ 5. w х Y=W/X Variable overhead cost per unit Direct Labor hour per unit Variable overhead per hour Increased by Revised overhead cost per hour Revised overhead cost per unit 15.00 1.50 10.00 5.00 15.00 22.50 20.00 2.00 10.00 5.00 15.00 30.00 AA=Y+Z AB=AA*X Note Income Statement Units sold Sell Price Star 100 3,500.00 200.00 Star 150 3,500.00 250.00 Total 7,000.00 Direct materials Direct Labor Variable overhead Total variable cost per unit 65.00 45.00 22.50 132.50 75.00 60.00 30.00 165.00 Contribution per unit Contribution margin Total Contribution margin 67.50 236,250.00 956,250.00 85.00 297,500.00 807,500.00 533,750.00 AC 1,763,750.00 AD=AC+G swer c 2 Differential profit increase | 236,250.00 297,500.00 533,750.00 Differential profit increase is same as additional contribution from sale to car sharing because Fixed cost is irrelevant cost for decision making. Please give positive ratings so I can keep answering. It would help me a lot. Please comment if you have any query. Thanks!

Due to character limit I am attaching the image for answer c.

Unter Components
Present Situation	Star 100	Star 150	Total	Note
Units sold	4,000.00	2,000.00	6,000.00	A
Sell Price	290.00	390.00		B
Sale Value	1,160,000.00	780,000.00	1,940,000.00	C=A*B
Direct materials	65.00	75.00
Direct Labor	30.00	40.00
Variable overhead	15.00	20.00
Total variable cost per unit	110.00	135.00		D
Total variable cost	440,000.00	270,000.00	710,000.00	E=D*A
Contribution per unit	180.00	255.00		F=B-D
Contribution margin	720,000.00	510,000.00	1,230,000.00	G=F*A
Total fixed cost per unit	90.00	120.00		H
Total fixed cost	360,000.00	240,000.00	600,000.00	I=H*A
Total profits	360,000.00	270,000.00	630,000.00	K=G-I
Direct Labor cost per unit	30.00	40.00		L
Wage rate per hour	20.00	20.00		M
Direct Labor hour per unit	1.50	2.00		N=L/M
Units sold	4,000.00	2,000.00	6,000.00	A
Direct Labor used	6,000.00	4,000.00	10,000.00	O=N*A
Contribution per unit	180.00	255.00		F
Contribution per hour	120.00	127.50		P=F/N
Answer a 1	Star 100	Star 150	Total
Offer to buy units	2,500.00	2,500.00
Direct Labor hour per unit	1.50	2.00
Direct Labor hours required	3,750.00	5,000.00	8,750.00
Answer a 2
	Star 100	Star 150	Total
Offer to buy units	2,500.00	2,500.00
Sell Price	200.00	250.00
Sale Value	500,000.00	625,000.00	1,125,000.00	Q
Total variable cost per unit	110.00	135.00
Total variable cost	275,000.00	337,500.00
Contribution margin	225,000.00	287,500.00	512,500.00	R
Total Contribution margin	945,000.00	797,500.00	1,742,500.00	T=R+G
Differential profit increase	225,000.00	287,500.00	512,500.00	S=Q-R
Differential profit increase is same as additional contribution from sale to car sharing because Fixed cost is irrelevant cost for decision making.
Answer b 1
If 3400 units of each product to be sold to car sharing service then first we calculate the hours needed:
	Star 100	Star 150	Total
Offer to buy units	3,500.00	3,500.00
Direct Labor hour per unit	1.50	2.00
Direct Labor hours required	5,250.00	7,000.00	12,250.00
Now we will see how much additional hours is required after the company has utilized its 20000 hours.
Total Labor hours			20,000.00
Labor hours already used in existing demand			10,000.00
Labor hours remaining			10,000.00
Direct Labor hours required			12,250.00
Additional Labor hours needed			2,250.00	T
To full fill above additional 2250 hours, existing sales has to be reduced. As calculated above in note P-
Star 100 has lower contribution per hour of $ 120 than Star 150. So sales of STAR 100 should be reduced by adjusting its labor hours.
Additional Labor hours needed			2,250.00	See T
Direct Labor hour per unit of STAR 100			1.50	See N
Number of units of STAR 100 to not be sold			1,500.00	U=T/N
Contribution per unit			180.00	See F
Loss of contribution on units not sold			270,000.00	V=U*F
Answer b 2
Revised profits	Star 100	Star 150	Total
Units sold to car sharing	3,500.00	3,500.00	7,000.00
Sell Price	200.00	250.00
Total variable cost per unit	110.00	135.00
Contribution per unit	90.00	115.00
Contribution amount	315,000.00	402,500.00	717,500.00
Less: Loss of contribution on units not sold of STAR 100			270,000.00	See F
Differential profit increase			447,500.00