25 May Question 146. Wehrs Corporation has received a request for a special order of 6,000 units
Question
146. Wehrs Corporation has received a request for a special order of 6,000 units of product K19 for $32.30 each. The normal selling price of this product is $33.45 each, but the units would need to be modified slightly for the customer. The normal unit product cost of product K19 is computed as follows:
| Direct materials…………………………………… | $15.00 | |
| Direct labor………………………………………… | 3.80 | |
| Variable manufacturing overhead………….. | 1.40 | |
| Fixed manufacturing overhead……………… | 2.10 | |
| Unit product cost………………………………… | $22.30 |
Direct labor is a variable cost. The special order would have no effect on the company’s total fixed manufacturing overhead costs. The customer would like some modifications made to product K19 that would increase the variable costs by $4.90 per unit and that would require a one-time investment of $23,000 in special molds that would have no salvage value. This special order would have no effect on the company’s other sales. The company has ample spare capacity for producing the special order.
Required:
Determine the effect on the company’s total net operating income of accepting the special order. Show your work!
147. A customer has asked Lalka Corporation to supply 3,000 units of product H60, with some modifications, for $34.70 each. The normal selling price of this product is $46.35 each. The normal unit product cost of product H60 is computed as follows:
| Direct materials………………………………….. | $14.70 | |
| Direct labor………………………………………… | 1.30 | |
| Variable manufacturing overhead…………. | 7.00 | |
| Fixed manufacturing overhead…………….. | 7.90 | |
| Unit product cost……………………………….. | $30.90 |
Direct labor is a variable cost. The special order would have no effect on the company’s total fixed manufacturing overhead costs. The customer would like some modifications made to product H60 that would increase the variable costs by $3.80 per unit and that would require a one-time investment of $24,000 in special molds that would have no salvage value. This special order would have no effect on the company’s other sales. The company has ample spare capacity for producing the special order.
Required:
Determine the effect on the company’s total net operating income of accepting the special order. Show your work!
148. Gloddy Company makes three products in a single facility. These products have the following unit product costs:
| Product A | Product B | Product C | ||
| Direct materials…………………………… | $24.90 | $25.70 | $26.60 | |
| Direct labor………………………………… | 13.30 | 17.10 | 15.70 | |
| Variable manufacturing overhead….. | 2.50 | 2.80 | 3.10 | |
| Fixed manufacturing overhead……… | 19.80 | 27.70 | 21.00 | |
| Unit product cost………………………… | $60.50 | $73.30 | $66.40 |
Additional data concerning these products are listed below.
| Product A | Product B | Product C | ||
| Mixing minutes per unit……………….. | 2.50 | 1.70 | 1.60 | |
| Selling price per unit……………………. | $71.50 | $87.90 | $83.00 | |
| Variable selling cost per unit…………. | $2.30 | $1.90 | $3.80 | |
| Monthly demand in units……………… | 1,000 | 3,000 | 3,000 |
The mixing machines are potentially the constraint in the production facility. A total of 10,800 minutes are available per month on these machines.
Direct labor is a variable cost in this company.
Required:
a. How many minutes of mixing machine time would be required to satisfy demand for all four products?
b. How much of each product should be produced to maximize net operating income? (Round off to the nearest whole unit.)
c. Up to how much should the company be willing to pay for one additional hour of mixing machine time if the company has made the best use of the existing mixing machine capacity? (Round off to the nearest whole cent.)
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