Case 3 - Marvin Co. For this case, review your lecture notes on Relevant Costing Marvin Co. manufactures both an automatic and a manual household dehumidifier. Exhibit 1 contains information on the price and cost per unit for both automatic and manual dehumidifiers. Exhibit I also contains production time for both products and capacity constraints. Because of limited demand, for several years, production has been at 80% of estimated capacity. Capacity is constrained by the number of machine hours available. Management wants to make use of the company's current excess capacity. Management has several independent strategies to utilize this excess capacity. For each independent strategy, conduct an incremental analysis to determine the net impact the strategy will have on operating income. Unless noted, all cells should only contain cell references. Then, make a suggestion to management on which strategy they should implement. Required: BASELINE Before analyzing the three strategies, in the ORANGE boxes: Calculate the contribution margin per unit for both products. Calculate the contribution margin per unit of machine hours for both products. Name: Exhibit 1: Data Automatic 350 Manual 150 Sales Price Per Unit Costs Direct Materials Direct Labor Variable MOH Fixed MOH Variable Operating Expenses Fixed Operating Expenses 65 35 68 50 RINI-I-NIR 32 25 16 18 21 13 52 30 Production Time (in Machine Hours) 2.5 1 Total Capacity (in Machine Hours) Excess Capacity (in Machine Hours) 50,000 10,000 Exhibit 2: Special Order Request Automatic 300 2,000 Special Price Quantity Manual 125 5,000 C Sa L. C Additional Fixed Cost 85.000 Baseline Manual 150 Automatic 350 Manual 150 Sales Price per Unit Less: Unit Variable Cost Contribution Margin per Unit Divided by: Machine Hours required to produce one Unit Contribution Margin per machine hour 32 25 16 18 21 13 2.5 Strategy 1: Special Order 1,225,000 1 Revenue from Special Order Less: Variable Cost from Special Order Contribution Margin Less: Additional Fixed Costs Net Change in Ol for Special Order 85,000