Complete the problems below. You must show your work to receive full credit.
Problem 1:
To manufacture a widget component requires an overhead (fixed) cost of $4000 and a variable unit cost of $5.50 per unit. What is the total cost and the average cost of producing a lot of 1500 widgets? If the selling price is $16 per unit, what is the break-even point? Explain what the break-even results means in terms of evaluating profit or loss.
Problem 2:
A manufacturing company is negotiating with a potential supplier for the purchase of 150,000 components. The manufacturer uses reverse pricing analysis to estimate the supplier’s variable costs are $7.00 per unit and that fixed costs, depreciation, overhead, etc., are $55,000. The supplier quotes a selling price at $12 per unit. Calculate the estimated average cost per unit. Do you think the supplier is asking too much for their parts? Could the purchasing department negotiate a better price? Explain your answer.
Note 1: In order to earn credit for your answers to the problems, you are required to show all supporting work. You will be expected to use Microsoft Office applications (Excel and Word) when showing your supporting work.
Note 2: If the problem asks you to draw an illustrative figure such as a chart, graph, or diagram, please do so in order to earn credit.
