The Famous Hockey Player Children’s Society makes and sells autographed hockey sticks to raise funds. Other than the aut
Posted: Tue Jul 05, 2022 1:36 pm
The Famous Hockey Player Children’s Society makes and sellsautographed hockey sticks to raise funds. Other than the autographname, all the sticks are the same. The society normally producesand sells 80,000 hockey sticks each year at a selling price of $40per unit. The company’s unit cost at this level of activity isgiven below:
Direct materials
$ 9.50
Direct labour
10.00
Variable manufacturing support
2.80
Fixed manufacturing support
5.00
($400,000 total)
Variable selling expenses
1.70
Fixed selling expenses
4.50
($360,000 total)
Total cost per unit
$33.50
Required:
Assume that the Society has sufficientcapacity to produce 100,000 hockey sticks each year without anyincrease in fixed manufacturing support costs. The society couldincrease sales by 25 percent above the present 80,000 units eachyear if it were willing to increase the fixed selling expenses by$150,000. Would the increased fixed selling expenses be justified?Explain.
Direct materials
$ 9.50
Direct labour
10.00
Variable manufacturing support
2.80
Fixed manufacturing support
5.00
($400,000 total)
Variable selling expenses
1.70
Fixed selling expenses
4.50
($360,000 total)
Total cost per unit
$33.50
Required:
Assume that the Society has sufficientcapacity to produce 100,000 hockey sticks each year without anyincrease in fixed manufacturing support costs. The society couldincrease sales by 25 percent above the present 80,000 units eachyear if it were willing to increase the fixed selling expenses by$150,000. Would the increased fixed selling expenses be justified?Explain.