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Ovation Company has a single product called a Bit The company normally produces and sells 60,000 Bits each year at a selling price of $32 per unit The company’s unit costs at this level of activity

Ovation Company has a single product called a Bit. The company normally produces and sells 60,000 Bits each year at a selling price of $32 per unit. The company’s unit costs at this level of activity are given below: A number of questions relating to the production and sale of Bits follow. Each question is independent. Required: 1. Assume that Ovation Company has sufficient capacity to produce 90,000 Bits each year without any increase in fixed manufacturing overhead costs. The company could increase its sales by 25% above the current 60,000 units each year if it were willing to increase the fixed selling expenses by $80,000. Would the increased fixed selling expenses be justified? 2. Assume again that Ovation Company has sufficient capacity to produce 90,000 Bits each year. A customer in a foreign market wants to purchase 20,000 Bits. Import duties on the Bits would be $1.70 per unit, and costs for permits and licences would be $9,000. The only selling costs that would be associated with the order are $3.20 per unit shipping cost. Compute the per unit break-even price on this order. 3. The company has 1,000 Bits on hand that have some irregularities and are therefore considered to be “seconds.” Due to the irregularities, it will be impossible to sell these units at the normal price through regular distribution channels. What unit cost figure is relevant for setting a minimum selling price? Explain. 4. Due to a strike in its supplier’s plant, Ovation Company is un

May 22 2020 View more View Less

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