Each job requires four labor hours for machine setup and 0.05 labor hours per container. Flexible costs comprise $1.60 per container for materials and $8.00 per labor hour for manufacturing support expenses. In addition, the firm must pay $20,000 per month for selling, general, and administrative expenses and $36,000 per month lease payments for machinery and physical facilities.

In April 2000, the firm won 90 orders, of which 60 were for 800 containers each and 30 were for 1600 containers each. Determine the total costs for April.

Capacity level, profitability, opportunity cost Wedmark Corporation's Cuper¬ tino, California, plant manufactures chips used in personal computers. Its practi¬ cal capacity is 2,000 chips per week. The selling price is $500 per chip. Production this quarter is 1,600 chips per week. Total costs of production this week at 80% of practical capacity level comprise $75,000 of capacity-related costs and $720,000 of flexible costs.

108 Chapter 3 REQUIRED

(a) What will the plant's profit be if it operates at practical capacity?

(b) If the plant's accounting system allocates capacity-related cost using a rate based on its practical capacity level as the base, what is the reported cost per unit?

(c) 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, pro¬ duction will increase from 1600 chips at present to 1800 chips per week.

What is the estimated change in the company's profit if it accepts the order?

(d) Suppose that the new customer in part

(c) offered $480 per chip for an order of 600 chips per week, and 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 Wed- mark's profit if it accepts this order for 600 chips per week?