Author Question: Lewis S. Gray Inc. manufactures a part for use in its production of art deco furniture. When 10,000 ... (Read 139 times)

clmills979 · **on:** Mar 6, 2021

Question 1

How does a manager go about choosing which of three products to produce and sell when each product uses a single machine with a limited capacity?

Question 2

Lewis S. Gray Inc. manufactures a part for use in its production of art deco furniture. When 10,000 items are produced, the costs per unit are:

Direct materials

$ 15

Direct manufacturing labor

60

Variable manufacturing overhead

25

Fixed manufacturing overhead

32

Total

$132

Colonial Accents Company has offered to sell to Lewis S. Gray 10,000 units of the part for $125 per unit. The plant facilities could be used to manufacture another part at a savings of $180,000 if Lewis S. Gray accepts the supplier's offer. In addition, $30 per unit of fixed manufacturing overhead on the original part would be eliminated.

Required:

a.	What is the relevant per unit cost for the original part?

b.	Which alternative is best for Lewis S. Gray Company? By how much?

okolip · **Reply #1 on:** Mar 6, 2021

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