Healthfirst (HF) Ltd has recently started to produce a face shield and products standard cost data are
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Question:
Healthfirst (HF) Ltd has recently started to produce a face shield and products standard cost data are as follows:
Cost per unit | |
Direct materials Perspex (0.5 meters @ $15 per meter) | $ 7.50 |
Direct materials Hardened Plastic (0.25 meters at $20.00 per meter) | 5.00 |
Direct manufacturing labour (0.5 hr @ $30.00 per hr) | 15.00 |
Manufacturing overhead | 30.00 |
Total Cost | $57.50 |
Additional information
45% of the Manufacturing overhead changes with the number of units produced. Additionally, if production of face shields is discontinued, 20% of the remaining fixed cost will be avoided. The budgeted production used to compute overheads is 10,000 units per quarter. HF has been approached by another company who is willing to supply the face shields at $50. Per unit. The space used to manufacture face shields can be used to Generate $ 120,000 in contribution margin per quarter.
Required
Should HF accept the offer. Show all computations.
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