Cheshire Cat Company Sells One of Its Products for $100

question 120

Multiple Choice

Cheshire Cat Company sells one of its products for $100 each. Sales volume averages 750 units per year. Recently, its main competitor reduced the price of its product to $80. Cheshire Cat Company expects sales to drop dramatically unless it matches the competitor's price. In addition, the current profit per unit must be maintained. Information about the product (for production of 750) is as follows: $\begin{array}{lrrr}&\mathrm{SQ} &\mathrm{AQ}& \text { Actual Cost }\\\text { Materials (pounds) } & 2,000 & 2,500 & \$ 50,000 \\\text { Labor (hours) } & 450 & 500 & 25,000 \\\text { Setups (hours) } & 0 & 600 & 7,500 \\\text { Material handling (moves) } & 0 & 300 & 3,750 \\\text { Warranties (number repaired) } & 0 & 200 & 15,000\end{array}$ The non-value-added cost per unit is

• A)$49.67.
• B)$48.33.
• C)$48.67.
• D)$51.67.

---

Definitions:

Gold-bearing Conglomerate

A sedimentary rock consisting of rounded pebbles and mineral fragments, among which gold particles are present.

Caldera

A large, cauldron-like depression that forms following the eruption and collapse of a magma chamber beneath a volcano.

Platinum

A dense, malleable, ductile, and highly unreactive precious metal used in jewelry, automotive catalytic converters, and various industrial applications.

Mafic to Ultramafic Intrusions

The intrusion of magma rocks ranging from mafic (rich in magnesium and iron) to ultramafic (extremely rich in magnesium and iron) compositions, important in the formation of various ore deposits.