Cullumber Packaging Company is a leading manufacturer of cardboard boxes and other product packaging solutions. One of the companys major product lines is custom-printed cake boxes that are sold to some of the countrys best known bakeries at a price of $0.50 per box. To maintain its high-quality image, Cullumber uses a thick premium coated paper for all of its cake boxes. Based on annual production of 1,000,000 boxes, Cullumbers cost for producing a box is as follows:

Paper $0.14

Ink 0.05

Direct labor 0.04

Variable overhead 0.08

Fixed overhead 0.10

Total cost per box $0.41

Andrea Borden, a recent graduate of the Culinary Institute of America, is opening a new bakery in her hometown. She recently contacted Brad Lail, Cullumbers top salesperson, about purchasing cake boxes for her new store. Brad described Cullumbers boxes, emphasizing the high-quality paper and the unique printing process the company uses. Andrea is looking for ways to lower her operating costs, so after hearing Brad describe Cullumbers boxes, she told him that all she needed was a simple, unprinted box. Andrea also told Brad that she needs 10,400 boxes and is willing to pay $0.24 per box.

(c) After visiting with Andrea, Brad received a fax from one of Londons top bakeries. The bakerys normal box supplier suffered some fire damage and is unable to ship the bakerys order of 10,400 boxes this month. The bakerys owner is asking if Cullumber can fill a onetime rush order of 10,400 boxes printed with the bakerys logo. The bakery is willing to pay a 10% price premium to expedite the order. If Cullumber accepts the order, it will incur $778 in export taxes and shipping. Calcuate the Profit on special order.

$

2. Blossom Water Co. is a leading producer of greenhouse irrigation systems. Currently, the company manufactures the timer unit used in each of its systems. Based on an annual production of 40,390 timers, the company has calculated the following unit costs. Direct fixed costs include supervisory and clerical salaries and equipment depreciation.

Direct materials		$12
Direct labor		7
Variable manufacturing overhead		4
Direct fixed manufacturing overhead		10	(30% salaries, 70% depreciation)
Allocated fixed manufacturing overhead		9
Total unit cost		$42

Clifton Clocks has offered to provide the timer units to Blossom at a price of $34 per unit. If Blossom accepts the offer, the current timer unit supervisory and clerical staff will be laid off.

Calculate the total relevant cost to make or buy the timer units. (Round answers to 0 decimal places, e.g. 5,275.)

Make

Buy

Assuming that Blossom Water has no other use for either the facilities or the equipment currently used to manufacture the timer units, should the company accept Cliftons offer?

Assume that if Blossom Water accepts Cliftons offer, the company can use the freed-up manufacturing facilities to manufacture a new line of growing lights. The company estimates it can sell 98,830 of the new lights each year at a price of $10. Variable costs of the lights are expected to be $7 per unit. The timer unit supervisory and clerical staff would be transferred to this new product line. Calculate the total relevant cost to make the timer units and the net cost if they accept Clifton's offer.

Relevant cost $

Net relevant cost if they accept offer $

Should Blossom Water accept Cliftons offer?