Ontrack Company produces compasses for cross-country skiing. The production capacity is 50 000compasses, and the company is

Question:

Ontrack Company produces compasses for cross-country skiing. The production capacity is 50 000compasses, and the company is currently operating at 80 per cent capacity. Variable manufacturing costs are $8 per unit. Fixed manufacturing costs are $400 000. The compasses are normally sold directly to Outdoor Tent City at $20 each. Ontrack has an offer from Never lost Company (a foreign wholesaler) to purchase an additional 5000 compasses at $11 per unit?
Required:
a. Calculate the available production capacity.
b. Calculate the per unit for both the current production of compasses and the special order compasses.
c. Should the special order be accepted? Show calculations.
d. What is the if Never lost required 12 000 compasses?
e. Would you recommend the special order if never lost Company required 12000 compasses? Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes... Opportunity Cost
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...