Unter Components manufactures low-cost navigation systems for installation in ride-sharing cars. It sells these systems to various car services that car customize them for their locale and business model. It manufactures two systems, the Star 100 and the Star 150, which differ in terms of capabilities. The following information is available:

The average wage rate is $40 per hour. Variable overhead varies with the quantity of direct labor-hours. The plant has a capacity of 20,000 direct labor-hours, but current production uses only 10,000 direct labor-hours.

Required:

a. A ration wide car-sharing service has offered to buy 2,500 Star 100 systems and 2,500 Star 100 systems and 2,500 Star 150 systems if the price is lowered to $400 and $500, respectively, per unit.

a-1. If Unter accepts the offer, how many direct labor-hours will be required to produce the additional systems?

a-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.

Differential revenues
Star 100
Star 150	$ 0
Deferential costs:
Star 100
Star 150	0
Deferential profit (loss)	$ 0

Transcribed Image Text:

Costs per Unit Direct materials Direct labor Variable overhead Fixed overhead Total cost per unit Price Units sold Star100 $ 130 60 30 180 $ 400 $ 580 4,000 Star150 $150 80 40 240 $ 510 $ 780 2,000 Costs per Unit Direct materials Direct labor Variable overhead Fixed overhead Total cost per unit Price Units sold Star100 $ 130 60 30 180 $ 400 $ 580 4,000 Star150 $150 80 40 240 $ 510 $ 780 2,000

Answer rating: 100% (QA)

a1 Star 100 Star 150 Direct Labor 60 80 Average Wage Rate 40 40 Direct L... View the full answer