Calculate the contribution margin rate for each product order

Renfrew Automotive On February 12, 2013, Renfrew Automotive (Renfrew), a major rm in the automotive manufacturing industry, approached AAW Windsor with an offer for a new, high-strength aluminum product to be used in the development of an automotive part. Based on the demanding mechanical properties required for the product, Renfrew requested a specic alloy that would meet the desired t, form and function. The annual volume of the sale would be 180,000 pieces, each weighing two pounds, for an expected two-year time horizon. Based on the specic alloy formulation, Renfrew would pay AAW Windsor the price of aluminum at the market rate plus a spread of $0.25 per pound.\" Renfrew would pick up the end product twice monthly; however, Renfrew's orders and scheduling could uctuate as much as 25 per cent, requiring AAW Windsor to maintain an average of 15 days' worth of inventory of the product at all times. AAW had a policy of offering credit terms to customers of net 45 days, but Renfrew would pay upon delivery due to the specialized nature of its product order. AAW Windsor determined the alloy mixture most appropriate for this order would be a mix of 50 per cent prime aluminum and 50 per cent scrap aluminum. The scrap aluminum could be purchased at a $0.06 per pound discount from the current market price of aluminum. Due to product-quality control, the projected manufacturing press recovery would be 80 per cent; therefore, based on the order's expected annual volume of 360,000 net pounds, 75,000 pounds would have to be cast every two months to extrude 60,000 net pounds. Since this product would be a new alloy developed specically for ch frew, it would cost $80,000 for the specialty cast moulds to be used in the manufacturing process. As well, there would be $20,000 spent annually for replacement cast moulds and maintenance costs on the equipment. The specialty moulds were expected to have a ve-year useful life and would be depreciated using the straight-line method. Crawford had anticipated spending five percent of his time over the next six months overseeing the initial manufacturing ofthis order for this new customer. Evers Manufacturing The following day, February 13, 2013, AAW Windsor received a request from Evers Manufacturing (Evers), a smaller niche automotive manufacturer. Evers' order would consist of 400,000 pieces, at one pound each, annually for two years. This alloy mix would consist of 10 per cent prime aluminum and 90 per cent scrap aluminum. Based on the commonality of the product, the customer spread was projected at $0.60 per pound. Evers would pick up the order monthly, but based on the product's niche use, the amount picked up could vary as much as 50 per cent. '5 The market price of aluminum uctuated dar'ty. Customers paid the prior month '5 average market price. During the past 2012 year, the approximate average price per pound was $0.95. The alloy to be developed was a more common formulation, so AAW Windsor would need only a $2,000 investment in new moulds for the manufacturing process. Additionally, no other maintenance costs would be required, but it was estimated that $2,500 in additional labour costs would be needed annually. This basic manufacturing would also demand only a 92 per cent manufacturing press recovery. As a result, it was decided to hold 30 days' worth of this order at all times. AAW Windsor noted that Evers would take advantage of AAW's credit terms to customers of net 45 clays