Cleenex corp. manufactures and sells one product Cleen. Production capacity is limited and totals 100,000 machine hours. Each unit of Cleen takes one machine hour to produce. Cleen sells for $10 per unit. Annual demand for Cleen is currently 80,000 units and is expected to remain constant. Table below provides data on manufacturing and selling costs for Cleen.

Fixed Costs per year:

Fixed Manufacturing Overhead $100,000

Fixed Selling and distribution 50,000

Variable Costs per unit:

Direct Labor 2.50

Direct Materials 1.50

Variable Manufacturing Overhead 0.80

Variable Selling and distribution 2.00

1. Cleenex has received a one-time special order for 10,000 units of Cleen. Acceptance of this order will not affect regular sales of 80,000 units. Variable selling costs for each of these 10,000 units will be $1 per unit instead of the normal $2 per unit. Determine the minimum acceptable price for Cleenex for accepting this special order.

2. Tidex Company has offered to make and ship 25,000 units of Cleen directly to Cleenex Companys customers. If Cleenex accepts this offer, it will continue to produce and ship the remaining 55,000 units. Cleenexs fixed selling and distribution costs will not be affected but its fixed manufacturing overhead will decrease to $90,000. For these 25,000 units shipped directly to Cleenexs customers by Tidex, variable selling and distribution costs will decrease to $ 0.80 per unit. Determine the maximum amount per unit that Cleenex should pay Tidex for producing and shipping the 25,000 units.

3. Cleenex can use its current facilities to manufacture a product called Jasmin. Annual demand for Jasmin which takes 2.5 machine hours per unit to produce is expected to be 40,000 units at a selling price of $16 per unit. Sale of Jasmin will not affect the demand for Cleen. Cost data for Jasmin follows:

Fixed Costs per year:

Fixed Manufacturing Overhead $100,000

Fixed Selling and distribution 50,000

Variable Costs per unit:

Direct Labor 4.00

Direct Materials 2.50

Variable Manufacturing Overhead 1.20

Variable Selling and distribution 3.30

Determine the product mix that will maximize Cleenex Companys profit.