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2 Stark Industries, a manufacturer of electronic parts, has recently received an invitation to bid on a special order for 20,500 units of one of
2 Stark Industries, a manufacturer of electronic parts, has recently received an invitation to bid on a special order for 20,500 units of one of its most popular products. Stark currently manufactures 41,000 units of this product in its Loveland, Ohio, plant. The plant is operating at 50% capacity. There will be no marketing costs on the special order. The sales manager of Stark wants to set the bid at $15 because she is sure that Stark will get the business at that price. Others on the executive committee of the firm object, saying that Stark would lose money on the special order at that price. Units 41,000 61,500 Manufacturing costs: Direct Materials 164,000 246,000 Direct labour 205,000 307,500 Factory overhead 328,000 430,500 Total Manufacturing 697,000 984,000 Unit cost $ 17.00 $ 16.00 Required 1) What is the relevant cost per unit? What do you think the minimum short-term bid price per unit should be? What would be the impact on short-term operating income if the order is accepted at the price recommended by the sales manager? 2) What would the total opportunity cost be if by accepting the special order the company lost sales of 5,900 units to its regular customers? Assume the preceding facts plus a normal selling price of $32 per unit. Part 2) What are the two main tools for data analytic used by Management Accountants
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