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A small Auckland based company, BigDan's Tools produces a small range of power tools for the local market. They specialise in power drills and
A small Auckland based company, BigDan's Tools produces a small range of power tools for the local market. They specialise in power drills and their most popular product is the Ateam Drill. They have a stable customer base and are not looking to expand right now or in the immediate future. Their current production is at 95% capacity, where full capacity is 80,000 Ateam Drills. A new customer, Nicky, got in touch with the owner of BigDan's Tools and asked about buying 2000 Ateam Drills. Nicky wants to buy 2000 Ateam Drills for a unit price of $7.50 per Ateam Drill. The current costs associated with making the Ateam Drills are: raw materials of $2.50 per unit, direct labour of $2 per unit, variable overhead of $1.50 per unit and fixed overhead of $25,500 per 80,000 Ateam Drills produced. Normal selling price for each Ateam Drill is $10 per unit. The impact to profit for the period if the special order is accepted is: $6000 $15,000 There is no way to tell with the information provided. $3000 $2380
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