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CYT Manufacturing (HK) Ltd, makes toys and sell to local customers. The company is approached by an Australian customer to fulfill a one-time-only special order
CYT Manufacturing (HK) Ltd, makes toys and sell to local customers. The company is approached by an Australian customer to fulfill a one-time-only special order for a toy similar to the one called Model A offered to local custom- ers. The company has excess capacity. The company management wants to find out more about the current situa- tion. The following per unit data of Model A apply for sales to regular local customers: Variable costs: Direct materials $120 Direct labor 60 Manufacturing support 105 Marketing costs 45 Fixed costs: Manufacturing support $135 Marketing costs 45 Markup (50%) $255 Required: Calculate the total cost of Model A per unit. (4 points) 1. 2. Calculate the contribution margin of Model A per unit. (4 points) What is the minimum acceptable price of this one-time-only special order? (2 points) What is the change in operating profits if the unit selling price for one-time-only special of 1,000 units is $540? (5 points)
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