1. Quinta Inc. manufactures machine parts for aircraft engines. The CEO is considering an offer from a subcontractor who would provide 2,800 units of product QR128 for a price of $190,000. If Quinta does not purchase these parts from the subcontractor it must produce them in-house with the following costs:
In addition to the above costs, if Quinta produces part QR128, there would also be a retooling and design cost of $13,000. Calculate the total relevant costs of producing 2,800 units of product QR128.
2. Carter Inc. produces two products, A and B. Pertinent data follow:
There is insufficient labor capacity in the plant to meet the combined demand for both products. Both products are produced through the same production departments. The fixed factory overhead rate is $10 per direct labor hour.
Required:
(1) Calculate the unit contribution margin for each product.
(2) Determine which product should be produced in priority, given the labor constraint, and explain why.