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Gleason manufactures a single product with the following full unit costs for 6,000 units: Direct materials $160 Direct labor 80 Manufacturing overhead (40% variable) 240
Gleason manufactures a single product with the following full unit costs for 6,000 units: Direct materials $160 Direct labor 80 Manufacturing overhead (40% variable) 240 Selling expenses (60% variable) 80 Administrative expenses (10% variable) 40 Total per unit $600 A company recently approached Gleason with a special order to purchase 1,000 units for $550. Gleason currently sells the models to dealers for $1,100. Capacity is sufficient to produce the extra 1,000 units. No selling expenses would be incurred on the special order. Required: a. Ignoring the special order, determine Gleasons profit on production and sales of 6,000 units. Ignore taxes in these analyses. b. Should Gleason accept the special order if its goal is to maximize short-run profits? Determine the impact on profit of accepting the order. c. Determine the minimum price Gleason would want to increase before tax profits by $30,000 on the special order. d. When making a special order decision, what non-quantitative aspects of the decision should Gleason consider? Problem 2. Canada Production Company has 200 labor-hours available. There is no limit on machine-hours. Canada can sell all of Y it wants, but it can only sell 40 units and 30 units of X and Z, respectively. Product X Product Y Product Z Contribution margin per unit $30 $15 $24 Labor-hours per unit 4 5 4 Machine-hours per unit 10 8 2 To maximize profits, how many units of each product should Canada produce
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