Reference no: EM132604988
Questions -
Q1) Sunray Corporation has analyzed their customer and order handling data for the past year and has determined the following costs:
Order processing cost per order $7
Additional costs if order must be expedited (rushed) $9.00
Customer technical support calls (per call) $12
Relationship management costs (per customer per year) $1200
In addition to these costs, product costs amount to 75% of Sales.
In the prior year, Sunray had the following experience with one of its customers, Rainwater Company:
Sales $16,000
Number of orders 160
Percent of orders marked rush 70%
Calls to technical support 80
Calculate the profitability of the Rainwater Company account.
Q2) Delta Games, Inc. produces a game that sells for $175 per unit. The cost of producing 25,000 games in the prior year was:
Direct material $625,000
Direct labor 375,000
Variable overhead 125,000
Fixed overhead 1,500,000
Total cost $2,625,000
At the start of the current year, the company received an order for 3,000 games from a gaming company in England. Management of Delta Games has mixed feelings about the order. On the one hand they welcome the order because they currently have excess capacity. Also, this is the company's first international order. On the other hand, the company in England is willing to pay only $125 per unit.
What will be the effect on profit of accepting the order?
Q3) Starship Company has $45 per unit in variable costs and $1,200,000 per year in fixed costs. Demand is estimated to be 108,000 units annually.
What is the price if a markup of 40% on total cost is used to determine the price?