# Case 18-1 Huron Automotive Company

Topics: Price, English-language films, The Contractor Pages: 1 (266 words) Published: September 23, 2012
Question No 7.
Assuming the facts of question no 6. Except that the idle facilities to be used to produce 800 modified hydraulic hoist/month. Sale Price - \$4950 each.
Variable Mfg Cost - \$3025/unit
Variable Markt Cost - \$550/unit
Fixed Mfg O/H and Marketing cost remains unchanged

What is the maximum price paid to the contractor?? Should the contract be accepted for a price of \$ 2475/unit to the contractor?? Solution:

Particulars.| 3000 Hoists| Contract for 1000 outsourced hoist Production of 800 modified Hoists Production of 2000 regular hoists| | Produced| |
| In-House | |
| | For 2000 units| For 1000 units | For 800 units | Total| Revenue| 3000*4350= \$1,30,50,000| 2000*4350= \$87,00,000| 1000*4350= \$43,50,000| 800*4950= \$39,60,000| \$ 1,70,10,000| Variable Mfg cost| 3000*1795=(\$ 53,85,000)| 2000*1795= (\$35,90,000)| -| 800*3025=\$(24,20,000)| (\$ 60,10,000)| Variable Mrktg Cost| 3000*275= \$ (8,25,000)| 2000*275= (\$ 5,50,000)| 220*1000 = (\$ 2,20,000)| 550*800= \$(4,40,000)| (\$ 12,10,000)| Contribution| \$ 68,40,000| \$ 45,60,000| \$ 41,30,000| \$ 11,00,000| \$97,90,000| Fixed Mfg Cost| (\$19,80,000)| | | | (\$19,80,000) | Fixed Mrktg Cost| (\$23,10,000)| | | | (\$23,10,000) | Income| \$ 25,50,000| | | | \$55,00,000 – X|

Let the amount paid to contractor be ‘X’
Payment to be done \$25,50,000 = \$55,00,000 - X
X = \$55,00,000 - \$25,50,000 \$ 29,50,000 which is \$2950/unit. The proposal should be accepted for a price of \$ 2475/unit to the contractor.

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