Retro Minis is a company that specializes in designing and manufacturing retro-inspired miniature refrigerators. Retro has seen an increase in sales over the past year and finds that many people are buying their products for home offices. Their initial offering was a shiny red fridge, and they have been contemplating adding a matte teal version within the next year. The two fridges would require different processes, and they have determined the following rates to apply to their key processes:
Retro has made the following predictions for the upcoming year:
Retro will be completing a batch of each fridge that matches the budgeted amounts above. Both refrigerators will require production, assembly, and inspection, with the red fridge using shiny paint and the teal fridge using matte paint. Please use this information to answer the following questions.
a. What are the total cost and cost per unit for the production of the red fridge batch?
b. What are the total cost and cost per unit for the production of the teal fridge batch?
c. What is the gross margin percentage for each fridge? Should Retro proceed with the production of the teal fridge or consider increasing its already popular red fridge?

Question

Retro Minis is a company that specializes in designing and manufacturing retro-inspired miniature refrigerators. Retro has seen an increase in sales over the past year and finds that many people are buying their products for home offices. Their initial offering was a shiny red fridge, and they have been contemplating adding a matte teal version within the next year. The two fridges would require different processes, and they have determined the following rates to apply to their key processes:
  Retro has made the following predictions for the upcoming year:
  Retro will be completing a batch of each fridge that matches the budgeted amounts above. Both refrigerators will require production, assembly, and inspection, with the red fridge using shiny paint and the teal fridge using matte paint. Please use this information to answer the following questions.
a. What are the total cost and cost per unit for the production of the red fridge batch?
b. What are the total cost and cost per unit for the production of the teal fridge batch?
c. What is the gross margin percentage for each fridge? Should Retro proceed with the production of the teal fridge or consider increasing its already popular red fridge?

Quizplus · Accepted Answer

The Answer of Retro Minis is a company that specializes in designing and manufacturing retro-inspired miniature refrigerators. Retro has seen an increase in sales over the past year and finds that many people are buying their products for home offices. Their initial offering was a shiny red fridge, and they have been contemplating adding a matte teal version within the next year. The two fridges would require different processes, and they have determined the following rates to apply to their key processes:
  Retro has made the following predictions for the upcoming year:
  Retro will be completing a batch of each fridge that matches the budgeted amounts above. Both refrigerators will require production, assembly, and inspection, with the red fridge using shiny paint and the teal fridge using matte paint. Please use this information to answer the following questions.
a. What are the total cost and cost per unit for the production of the red fridge batch?
b. What are the total cost and cost per unit for the production of the teal fridge batch?
c. What is the gross margin percentage for each fridge? Should Retro proceed with the production of the teal fridge or consider increasing its already popular red fridge?

Retro Minis Is a Company That Specializes in Designing and Manufacturing