PA2. LO 10.1 Syntech makes digital cameras for drones. Their basic digital camera uses $80 in variable costs and requires
$1,500 per month in fixed costs. Syntech sells 100 cameras per month. If they process the camera further to enhance its
functionality, it will require an additional $45 per unit of variable costs, plus an increase in fixed costs of $1,000 per month. The
current price of the camera is $160. The marketing manager is positive that they can sell more and charge a higher price for the
improved version. At what price level would the upgraded camera begin to improve operational earnings?
PA4. LO 10.2 Ken Owens Construction specializes in small additions and repairs. His normal charge is $400/day plus
materials. Due to his physical condition, David, an elderly gentleman, needs a downstairs room converted to a bathroom. Ken
has produced a bid for $5000 to complete the bathroom. He did not provide David with the details of the bid. However, they are
shown here.
Ken's Bid Detail Dollars
Direct material
$2,200
Direct labor
1,600
Variable overhead
200
Fixed overhead
600
Profit
400
$5,000
A. The town's social services has asked Ken if he could reduce his bid to $4000. Should Ken accept the counter offer?
Current Bid
New Bid
Direct material
$2,200
$2,200
Direct labor
1,600
1,600
Variable overhead
200
200
Fixed overhead
600
Profit
400
5,000
4,000
B. How much would his income be reduced?
C. If the town's social services guaranteed him another job next month at his normal price, could he accept this job at
$4000?
