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Chapter 23: Q10DQ (page 1049)

Assume that Samsung manufactures and sells 60,000 units of a product at \(11,000 per unit in domestic markets. It costs \)6,000 per unit to manufacture (\(4,000 variable cost per unit, \)2,000 fixed cost per unit). Can you describe a situation under which the company is willing to sell an additional 8,000 units of the product in an international market at $5,000 per unit?

Short Answer

Expert verified

The company sells the product to expand the business.

Step by step solution

01

Definition of variable cost

The variable cost is the cost that does not remain fixed and changes according to the production level.

02

Situation in which the company sells products at low cost

In most cases, the company cannot sell the product at a low cost but there is one situation in which the company sells the product at a low cost. The company sells the product at a low cost only when the company wants to expand its business internationally. By doing this the company can expand its business easily.

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Most popular questions from this chapter

Varto Company has 7,000 units of its sole product in inventory that it produced last year at a cost of \(22 each. This year’s model is superior to last year’s, and the 7,000 units cannot be sold at last year’s regular selling price of \)35 each. Varto has two alternatives for these items: (1) they can be sold to a wholesaler for \(8 each or (2) they can be reworked at a cost of \)125,000 and then sold for $25 each. Prepare an analysis to determine whether Varto should sell the products as is or rework them and then sell them.

Gilberto Company currently manufactures 65,000 units per year of one of its crucial parts. Variable costs are \(1.95 per unit, fixed costs related to making this part are \)75,000 per year, and allocated fixed costs are \(62,000 per year. Allocated fixed costs are unavoidable whether the company makes or buys the part. Gilberto is considering buying the part from a supplier for a quoted price of \)3.25 per unit guaranteed for a three-year period. Should the company continue to manufacture the part, or should it buy the part from the outside supplier? Support your answer with analyses.

Restaurants often add and remove menu items. Visit a restaurant and identify a new food item. Make a list of costs that the restaurant must consider when deciding whether to add that new item. Also, make a list of nonfinancial factors that the restaurant must consider when adding that item.

Refer to QS 23-1 and QS 23-2. What nonfinancial factors should Helix consider before accepting this order? Explain.

Refer to the data in QS 23-1. Based on financial considerations alone, should Helix accept this order at the special price? Explain.
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