The backpacks are being manufactured in a prototype manner with all handmade labor in San Jose that
Question:
The backpacks are being manufactured in a prototype manner with all handmade labor in San Jose that results in high direct labor costs of $25.00 per unit. The entrepreneur is working to automate the production or to outsource it to a low labor cost region. Until they do this, the company has to incur the high direct labor expenses. Assume also that the company is experiencing a demand of 150 units a month from customers that they want to satisfy as they build their brand. However, regardless of their expenses, because of market conditions, they can only sell each backpack for $19.95 per unit.
Question:
Having raised additional funding and now with $50,000 in cash in the bank, How long does the company have to find a much lower cost production solution before they run are out of cash and are not able to produce additional backpacks to meet customer demand?
Financial and Managerial Accounting
ISBN: 978-0132497978
3rd Edition
Authors: Horngren, Harrison, Oliver