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a) The company receives an offer to manufacture 80 high quality chairs for a new restaurant for a price of $565 per chair. The cost
a) The company receives an offer to manufacture 80 high quality chairs for a new restaurant for a price of $565 per chair. The cost per chair would be the same as the current production run, but the higher processing quality adopted for the 80 chairs would require 5 machine hours in the manufacturing process. Should Mulligan accept this offer? Support your answer with calculations. (10 points) Mulligan Furniture specializes in high-end furniture for the living room. The chair manufacturing department currently manufactures 12,000 designer chairs annually. Each chair uses an average of 4 machine hours in the manufacturing process. To ensure the high-end quality, Mulligan's machines require chairs to be processed one after the other. Mulligan is currently manufacturing at full capacity. The following is an excerpt of Mulligan financial reports for the chair manufacturing department: Sales Price (per unit) $ 530 Allocated Overhead $ 864,000 Fixed Depreciation of Machinery $ 177,000 Direct Material Costs $ 1,967,000 Direct Labour $ 1,363,000
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