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Comfy Chairs manufactures desk and gaming chairs. The per unit data for each chair is below: Desk Chair Gaming Chair Selling price $199 $299 Direct
Comfy Chairs manufactures desk and gaming chairs. The per unit data for each chair is below: Desk Chair Gaming Chair Selling price $199 $299 Direct materials $50 $80 Direct labour at $25 per direct labour hour $25 $50 Variable manufacturing overhead $15 $30 Fixed manufacturing overhead $50 $50 Required: 1. Comfy Chairs has been approached by a new customer offering to purchase 4,000 units of gaming chairs at $220 per unit. If Comfy Chairs accepts this order, it will need to spend an additional $50 per unit due to the additional features requested by the new customer. If the special order is accepted, the present sales and fixed overhead costs of Comfy Chairs will not be affected. By how much will operating income increase or decrease if the special order is accepted? Should Comfy Chairs accept or reject the special order? Please provide detailed calculations and explanations to support your answer. 2. Comfy Chairs can sell the desk chair for $250 per unit if it spends another $52 per unit to upgrade the chair. If there is spare capacity, should Comfy Chairs process the desk chair further? Please provide detailed calculations and explanations to support your answer. 3. Due to COVID-19 restrictions, Comfy Chairs is experiencing a reduction in labour hours and only has 8,000 direct labour hours available for the period. According to the sales manager, the market demand for desk chairs is 4,000 units and gaming chairs is 6,000 units for the period. How many desk chairs and gaming chairs should Comfy Chairs produce to achieve optimal product mix and what will be the total contribution margin earned from the optimal mix? Please provide detailed calculations and explanations to support your
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