Prudent Products Corporation manufactures and sells 1,000 motorcycle engines each month. A primary component in each mot

[answerhappygod]

Prudent Products Corporation Manufactures And Sells 1 000 Motorcycle Engines Each Month A Primary Component In Each Mot 1 (146.78 KiB) Viewed 51 times

Prudent Products Corporation manufactures and sells 1,000 motorcycle engines each month. A primary component in each motor is an oil pump used to keep the motor lubricated. Prudent Products has the monthly capacity to produce 1,500 oil pumps. The variable unit costs associated with manufacturing each pump are shown below: Direct materials $ 38 Direct labor 28 Variable manufacturing overhead 48 Fixed manufacturing overhead per month (for up to 1,500 units of production) averages $46,000. Volk's Autos, Incorporated, has offered to purchase 250 oil pumps from Prudent Products per month to be used in its own motorcycles. Required: Answer the following questions: (A) What is Prudent Product's average unit cost of manufacturing each oil pump if it rejects Volk's Autos' order? (B) What is the incremental unit cost of producing each additional oil pump? (C) If this special order is accepted, what selling price per unit must Prudent Products charge Volk's Autos in order to earn a $20,000 monthly pretax profit on the sale?