2. ToysRNZ produces and sells plastic lightsabres for $20 each. Their variable cost is $16 each. Relevant fixed costs are $120,000. ToysRNZ sells all lightsabres it produces, there is no inventory of unsold lightsabres. The relevant range of pro-

 

Transcribed Image Text:

2. ToysRNZ produces and sells plastic lightsabres for $20 each. Their variable cost is $16 each. Relevant fixed costs are $120,000. ToysRNZ sells all lightsabres it produces, there is no inventory of unsold lightsabres. The relevant range of pro- duction is between 5,000 and 40,000 lightsabres. All information in this question relates to a single fiscal year. (a) What should the production level be if ToysRNZ wants to achieve a profit of $30,000? (6 marks) (b) Because of the new Star Wars release, demand increases by 12,500 lightsabres. This will push production significantly beyond the relevant range. To sat- isfy the higher demand, ToysRNZ can rent additional production capacity. In order to maintain a profit of $30,000, what is the maximum amount that ToysRNZ should pay for the additional capacity? 3. Explain one important disadvantage of activity based costing. (6 marks) (4 marks) 2. ToysRNZ produces and sells plastic lightsabres for $20 each. Their variable cost is $16 each. Relevant fixed costs are $120,000. ToysRNZ sells all lightsabres it produces, there is no inventory of unsold lightsabres. The relevant range of pro- duction is between 5,000 and 40,000 lightsabres. All information in this question relates to a single fiscal year. (a) What should the production level be if ToysRNZ wants to achieve a profit of $30,000? (6 marks) (b) Because of the new Star Wars release, demand increases by 12,500 lightsabres. This will push production significantly beyond the relevant range. To sat- isfy the higher demand, ToysRNZ can rent additional production capacity. In order to maintain a profit of $30,000, what is the maximum amount that ToysRNZ should pay for the additional capacity? 3. Explain one important disadvantage of activity based costing. (6 marks) (4 marks)

• Expert Answer

Qn 2 A Production level at desire profit Fixed cost profit Contrid View the full answer