2 3 4 5 6 7 8 Birds Wallets (BW) produces nylon waterproof wallets. BW's plant capacity is 50,000 wallets per month Unit costs for the current production volume of 46,000 wallets are: Direct materials $ 15.00 Direct labour 10.00 Variable overhead 3.50 Fixed overhead 6.50 Selling and admin - Variable 3.00 Selling and admin- Fixed 9.00 10 $ 47.00 21 Current monthly sales are 46,000 wallets at the selling price $60 each. 2 A customer, RIO, has approached BW about purchasing 5,000 wallets at $50 each for one-time order. BW's manager is unwilling to accept the order as the price is lower than the regular price. 9 The existing production technology RW uses to make nylon wallets could be used to make these wallets. However, a special machine costing $8,000 needs to be purchased to print the logo that RIO wants. Variable marketing costs (sales commissions) would not be paid on the special order. 1. Quantitative factor alone, determine whether or not BW should accept the order. If the order is accepted, what is the impact on the company's overall profit? ( 9 marks) 14 5 5 2. What is the minimum price for the order? ( 2 marks) 3. Assume now BW has no capacity available for the special order, what should be the minimum price to be charged