Special-order decision. The Modern Packing Corporation (MPC) specializes in the manu¬

facture of one-litre plastic botdes. The plastic moulding machines are capable of producing

, 100 bottles per hour. The firm estimates that the variable cost of producing a plastic bottle is y 25 cents. The bottles are sold for 55 cents each.

Management has been approached by a local toy company that would like the firm to produce a moulded plastic toy for them. The toy company is willing to pay $3.30 per unit for the toy. The unit variable cost to manufacture the toy will be $2.64. In addition, MPC would have to incur a cost of $22,000 to construct the mould required exclusively for this order.

Because the toy uses more plastic and is of a more intricate shape than a bottle, a moulding machine can produce only 40 units per hour. The customer wants 100,000 units. Assume that MPC has a total capacity of 10,000 machine-hours available during the period in which the toy company wants delivery of the toys. The firm’s fixed costs, excluding the costs to construct the toy mould, during the same period will be $220,000.

Required 1. $uppose the demand for its bottles is 750,000 units, and the special toy order has to be either taken in full or rejected totally. $hould MPC accept the special toy order? Explain your answer.

2. $uppose the demand for its botdes is 850,000 units, and the special toy order has to be either taken in full or rejected totally. Should MPC accept the special toy order? Explain your answer.

3. $uppose the demand for its bottles is 850,000 units, and MPC can accept any quantity of the special toy order. How many bottles and toys should it manufacture?

4. Suppose the demand for its botdes is 900,000 units, and the special toy order has to be either taken in full or rejected totally. Should MPC accept the special toy order? Explain your answer.

5. Suppose the demand for its botdes is 900,000 units, and MPC can accept any quantity of the special toy order. How many botdes and toys should it manufacture?

6. Suppose the demand for its bottles is 950,000 units, and MPC can accept any quantity of the special toy order. How many botdes and toys should it manufacture?

7. The management has located a firm that has just entered the moulded plastic business.

This firm has considerable excess capacity and more efficient moulding machines, and is willing to subcontract the toy job, or any portion ofit, for $3.08 per unit. It will construct its own toy mould, Suppose the demand for its botdes is 900,000 units, and MPC can accept any quantity of the special toy order. How many bottles and toys should MPC manufacture? How many toys should it subcontract out?