Q1) Generators, Inc. manufactured emergency backup generators for use in large commercial buildings. Costs of manufacturing and marketing generators at company's normal volume of 3,000 units per month are shown.
Costs per Unit for Generators
| Unit Manufacturing costs: |
| Variable Materials |
$1,000 |
|
| Variable Labor |
1,500 |
|
| Variable Overhead |
500 |
|
| Fixed Overhead |
1,200 |
|
| Total Manufacturing Cost |
|
$4,200 |
| Unit Marketing Costs: |
| Variable |
500 |
|
| Fixed |
1,400 |
|
| Total Marketing Cost |
|
1,900 |
| Total Unit Cost: |
|
$6,100 |
Following questions refer only to data given above. Unless otherwise stated, suppose there is no connection between situations explained in each of questions, each is to be treated independently. Unless otherwise stated, regular selling price of $7,400 per unit must be assumed.
Inventory of 230 units of obsolete model remains in stockroom. Due to changes in technology, these units can't be sold through regular channels to existing customers, and will soon be valueless. On overseas distributor has expressed interest in these units if price is substantially reduced. Find out the minimum price that would be acceptable to Redi-Watt in selling these units.