04 Mar Costing orders, profitability, and opportunity cos
Costing orders, profitability, and opportunity cost Wedmark Corporation’s Cupertino, California, plant manufactures chips used in personal computers. Its practical capacity is 2,000 chips per week, and fixed costs are $75,000 per week. The selling price is $500 per chip. Production this quarter is 1,600 chips per week. At this level of production, variable costs are $720,000 per week.Required(a) What will the plant’s profit per week be if it operates at practical capacity?(b) Suppose that a new customer offers $480 per chip for an order of 200 chips per week for delivery beginning this quarter. If this order is accepted, production will increase from 1,600 chips at present to 1,800 chips per week. What is the estimated change in the company’s profit if it accepts the order?(c) Suppose that the new customer in part b offered $480 per chip for an order of 600 chips per week and that Wedmark cannot schedule overtime production. Consequently, it would have to give up some of its current sales to fill the new order for 600 chips per week. What is the estimated change in Wedmark’s profit if it accepts this order for 600 chips per week?
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