Anchor Company manufactures several different styles of jewelry cases. Management estimates that during the third quarter of 20x6 the company will be operating at 80 percent of normal capacity. Because the company desires a higher utilization of plant capacity, the company will consider a special order. Anchor has received special a special order inquiry. The special order was submitted by the JCP Co. for 7,500 jewelry cases at $7.50 per case. These jewelry cases would be marketed under the JCP label and have to be shipped by October 1, 20x6. However, the JCP jewelry case is different from any jewelry case in the Anchor line. The estimated per unit costs of this case are as follows: Raw materials Direct labor .5 hrs. @ $6.00 Overhead .55 machine hrs. @ $4.00 $3.25 $3.00 $2.20 In addition, Anchor will incur $2,000 in additional set-up costs and will have to purchase a $2,500 special device to manufacture these cases; this device will be discarded once the special order is completed. The Anchor manufacturing capabilities are limited to the total machine hours available. The plant capacity under normal operations is 90,000 machine hours per year or 7,500 machine hours per month. The budgeted fixed overhead for 20x6 amounts to $216,000. All manufacturing overhead costs are applied to production on the basis of machine hours at $4.00 per hour. Anchor will have the entire third quarter to work on the special order. Management does not expect any repeat sales to be generated from the special order. Company practice precludes Anchor from subcontracting any portion of an order when special orders are not expected to generate repeat sales. REQUIRED: Answer the following: (Unless all supporting schedules and computations for every answer are presented in good traceable order, there will be NO credit 1. _The available capacity in machine hours that Anchor will have for the third quarter, 20x6. Show all calculations for credit. 2. credit. The required machine hours required to take the JCP Co. order. Show all calculations for 3. $ _Present the amount that profit would increase or (decrease) if the JCP Cl:order, is accepted. Show all calculations and schedule(s) for credit. Anchor Company manufactures several different styles of jewelry cases. Management estimates that during the third quarter of 20x6 the company will be operating at 80 percent of normal capacity. Because the company desires a higher utilization of plant capacity, the company will consider a special order. Anchor has received special a special order inquiry. The special order was submitted by the JCP Co. for 7,500 jewelry cases at $7.50 per case. These jewelry cases would be marketed under the JCP label and have to be shipped by October 1, 20x6. However, the JCP jewelry case is different from any jewelry case in the Anchor line. The estimated per unit costs of this case are as follows: Raw materials Direct labor .5 hrs. @ $6.00 Overhead .55 machine hrs. @ $4.00 $3.25 $3.00 $2.20 In addition, Anchor will incur $2,000 in additional set-up costs and will have to purchase a $2,500 special device to manufacture these cases; this device will be discarded once the special order is completed. The Anchor manufacturing capabilities are limited to the total machine hours available. The plant capacity under normal operations is 90,000 machine hours per year or 7,500 machine hours per month. The budgeted fixed overhead for 20x6 amounts to $216,000. All manufacturing overhead costs are applied to production on the basis of machine hours at $4.00 per hour. Anchor will have the entire third quarter to work on the special order. Management does not expect any repeat sales to be generated from the special order. Company practice precludes Anchor from subcontracting any portion of an order when special orders are not expected to generate repeat sales. REQUIRED: Answer the following: (Unless all supporting schedules and computations for every answer are presented in good traceable order, there will be NO credit 1. _The available capacity in machine hours that Anchor will have for the third quarter, 20x6. Show all calculations for credit. 2. credit. The required machine hours required to take the JCP Co. order. Show all calculations for 3. $ _Present the amount that profit would increase or (decrease) if the JCP Cl:order, is accepted. Show all calculations and schedule(s) for credit
