Travers Corporation Is Working at Full Production Capacity Producing 10,000

question 12

Essay

Travers Corporation is working at full production capacity producing 10,000 units of a unique product,RST.Manufacturing costs per unit for RST follow:
The unit manufacturing overhead cost is based on a variable cost per unit of $2 and fixed costs of $30,000 (at full capacity of 10,000 units).The non-manufacturing costs,all variable,are $4 per unit,and the selling price is $20 per unit.A customer,Blanding Company,has asked Travers to produce 2,000 units of a modification of RST to be called XYZ.XYZ would require the same manufacturing processes as RST.Blanding Company has offered to share equally the non-manufacturing costs with Travers.XYZ will sell at $15 per unit.
Required:

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Definitions:

Takings Clause

A clause in the Fifth Amendment of the U.S. Constitution requiring that when government uses its power to take private property for public use, it must pay the owner just compensation, or fair market value, for the property. Also called just-compensation clause.

Just Compensation

The fair payment required to be given to a property owner when their property is taken for public use, under eminent domain.

Self-Incrimination

The act of exposing oneself to prosecution by being forced to respond to questions or by providing evidence in a legal proceeding.

Fifth Amendment

The Fifth Amendment refers to a part of the United States Constitution that provides several protections to individuals, including rights against self-incrimination and double jeopardy, and the assurance of due process.