Costs: Direct material CHAPTER TWENTY PRICING AND PRODUCT MIX DECISIONS 99 Direct labour Manufacturing overhead-variable Manufacturing overhead-fixed Corporate administration-fixed Total costs Profit before taxes Income taxes (25%) Net profit $ 3000 3750 1125 750 375 $ 9000 $ 2250 562.5 $1687.5 Harmon, which expects continued operations at 75 per cent of capacity, recently submitted a b $82500 on custom-designed machinery for Holistic Pizza Ltd. Harmon used a pricing formula in derivin bid amount, the formula being based on last year's operating results. The formula follows: Estimated direct material Estimated direct labour Estimated manufacturing overhead @ 50% of direct labour Estimated corporate overhead @ 10% of direct labour Estimated total costs excluding sales commissions Add 25% income taxes Suggested price before sales commissions Suggested total price: $74250+ 0.9 (to adjust for 10% sales commission) Required: $14600 28000 14000 2800 $59400 14850 $74250 $82500 1. Calculate the impact the order would have on Harmon's profit if the $82 500 bid were accepted by Pizza Ltd. 2. Assume that Holistic Pizza has rejected Harmon's bid but has stated it is willing to pay $63500 machinery. Should Harmon manufacture the machinery for the counter-offer of $63500? Expla answer and show calculations. 3. At what bid price will Harmon break even on the order? 4. Explain how the profit performance in the coming year would be affected if Harmon accepted work at prices similar to Holistic Pizza's $63500 counter-offer described in requirement 2. 5. Construct an Excel spreadsheet to solve requirements 1 and 2, above. Show how the solution wi if the following information changes: direct material was $2900000 and direct labour was $380 the year just ended, and sales commission was 8 per cent. facturer Costs: Direct material CHAPTER TWENTY PRICING AND PRODUCT MIX DECISIONS 99 Direct labour Manufacturing overhead-variable Manufacturing overhead-fixed Corporate administration-fixed Total costs Profit before taxes Income taxes (25%) Net profit $ 3000 3750 1125 750 375 $ 9000 $ 2250 562.5 $1687.5 Harmon, which expects continued operations at 75 per cent of capacity, recently submitted a b $82500 on custom-designed machinery for Holistic Pizza Ltd. Harmon used a pricing formula in derivin bid amount, the formula being based on last year's operating results. The formula follows: Estimated direct material Estimated direct labour Estimated manufacturing overhead @ 50% of direct labour Estimated corporate overhead @ 10% of direct labour Estimated total costs excluding sales commissions Add 25% income taxes Suggested price before sales commissions Suggested total price: $74250+ 0.9 (to adjust for 10% sales commission) Required: $14600 28000 14000 2800 $59400 14850 $74250 $82500 1. Calculate the impact the order would have on Harmon's profit if the $82 500 bid were accepted by Pizza Ltd. 2. Assume that Holistic Pizza has rejected Harmon's bid but has stated it is willing to pay $63500 machinery. Should Harmon manufacture the machinery for the counter-offer of $63500? Expla answer and show calculations. 3. At what bid price will Harmon break even on the order? 4. Explain how the profit performance in the coming year would be affected if Harmon accepted work at prices similar to Holistic Pizza's $63500 counter-offer described in requirement 2. 5. Construct an Excel spreadsheet to solve requirements 1 and 2, above. Show how the solution wi if the following information changes: direct material was $2900000 and direct labour was $380 the year just ended, and sales commission was 8 per cent. facturer