Special order. Sam Park's Electronics, Inc., sells high-quality copy machines for corporations. It manufactures two copy machines, the MX201 and the ZX402, for which the following information is available:

The average wage rate is $25 per hour. The plant has a capacity of 23,000 direct labor hours, but current production uses only 20,500 direct labor hours.

a. A new customer has offered to buy 30 units of ZX402 if its price is lowered to $3,750 per unit. How many direct labor hours will be required to produce 30 units of ZX402? How much will the profit increase (or decrease) if Sam Park's accepts this proposal? All other prices will remain the same.

b. Suppose the customer has offered instead to buy 70 units of ZX402 at $3,500 per unit. How much will the profits change if the order is accepted? Assume that the company cannot increase its production capacity to meet the extra demand.

c. Answer part

b. assuming instead that the plant can work overtime. Direct labor costs for the overtime production increase to $50 per hour. Variable overhead costs for overtime production are the same as for normal production.

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Costs per Unit Direct Materials Direct Labor Variable Overhead Fixed Overhead Total Cost per Unit Price Units Produced and Sold MX201 $ 500 ZX402 $ 700 1,000 800 600 900 750 1,000 $2,650 $3,600 $3.500 $4,200 425 220