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Question: Name on Request Company produces a single product called Thing. The company normally produces and sells 50,000 Things each year at a selling price of $50 per unit, The company's unit costs and total costs at this level is given below:

 

Direct Materials

Unit Cost

$15

Total Cost

$750,000

Direct Labor

8

400,000

Variable Manufacturing Overhead

3

150,000

Fixed Manufacturing Overhead

9

450,000

Variable Selling Expenses

4

200,000

Fixed Selling Expenses

6

300,000

Cost per Unit and Total Cost

$45

$2,250,000

1. Assume Name on Request Company has enough capacity to produce 75,000 Things per year without any increase in fixed manufacturing overhead costs. The company could increase its sales by 30% above the present 50,000 units each year if it is willing to increase its advertising expense by $80,000. Would the increased expense be justified?

Please show all calculations.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M92569802

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