Epson produces color cartridges for inkjet printers. Suppose cartridges are sold to mail-order distributors for...
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Epson produces color cartridges for inkjet printers. Suppose cartridges are sold to mail-order distributors for $4.80 each and that manufacturing and other costs are as follows: Variable Costs per Unit Fixed Costs per Month EN $2.00 0.20 Factory overhead.. Selling and administrative. $15,000 5.000 Direct materials. Direct laboris. Factory overhead. HIE $20,000 Distribution. ER Total $2.50 The variable distribution costs are for transportation to mail-order distributors. Also assume the current monthly production and sales volume is 15.000 and monthly capacity is 20.000 units. REQUIRED Determine the effect of the following situation on monthly profits. A Mexican manufacturer has offered a one-year contract to supply ink for the cartridges at a cost of $1.00 per unit. If Epson accepts the offer, it will be able to reduce variable manufacturing costs by 40% and rent some of its factory space to another company for $1.000.00 per month
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