HW 13 question 1

Wesco incorporateds only product 15 a combination fertilizer/weediller called GrowNWeed GrowNWeed is sold nationwide to retall nurseries and garden stores. Zwinger Nursery plans to self a similar ferblizeriweedicller compound through its regional nursery chain under its own private label. Zwinger does not have martufacturing facilites of its own, so it has asked Wesco (and several other companies) to submit a bid for manufacturing and delivering a 29,000 pound order of the private brand compound to Zwinger. While the chemical composition of the Zwinger compound differs from that of GrowNWeed, the manufacturing processes are very similar. The Zwinger compound would be produced in 1,000 pound lots Each lot would require 32 direct labor hours and the following chemicals The first three chemicals (AG.5, KL-2, and CW-7) are all used in the production of GrowNWeed, DF 6 was used in another compound that Wesco discontinued several months ago. The supply of DF 6 that Wesco had on hand when the other compound was discontinued was not discarded, Wesco conld sell its supply of DF. 6 at the prevailing market price less $0.11 per pound seling and handing experses. Wesco diso has on hand a chemical called BH3, which was manufactured for tise in another product that is no langer produced. BH:3, Which cannot be used in GrowNWeed, can be substituted for AG.5 on a one-for-orie basis without affecting the quality of the Zwinger compound. The BH3 in inventory has a salivage value of $470 Inventory and cost data for the chemicals that can be used to produce the Zwinger compound are shown below: Inventory and cost data for the chemicals that can be used to produce the Zwinger compound are shown belowa The current direct labor wage rate is $14 per hour. The predetermined overhead rate is based on direct labor-hours (DLH). The predetermined overhead rate for the current year, based on a two-shift capacity with no overtime, is as follows: Wesco's production manager reports that the present equipment and facilties are adequate to manufacture the 7winger compound. Therefore, the order would have no effect on total fixed manufacturing overhead costs. However, Wesco is within 100 hours of its two. shift capacity this month. Any additional hours beyond the 100 hours must be done in overtime. If need be, the Zwinger compound could be produced on regular time by shifting a portion of GrowNWeed production to overtime. Wesco's direct labor wage rate for overtime is $21 per hout. There is no allowance for any overtime premlum in the predetermined overhead rate Required: 1. Wesco has decided to submit a bid for the 29.000 pound order of Zwinger's new compound. The order must be delivered by the end of the current month. Zwinger has indicated that this is a one-time order that will not be repeated. Calculate the lowest price that Wesco could bid for the order and still exactly cover its incremental manufacturing costs. 2. Refer to the original data. Assume that Zwinger Nursery plans to place regular orders for 29.000-pound lots of the new compound. Wesco expects the demand for GrowNWeed to temaln strong. Therefore, the recurring orders from Zwinger would put Wesco over its two-shift capaclty. However, production could be scheduled so that 60% of each Zwinger order could be completed during regular hours. As another option, some GrowNWeed production could be shifted temporarily to overtime so that the Zwinger orders could be produced on regular time. Current market prices are the best avallable estimates of future market prices. Wesco's standard markup policy for new products is 40% of the full manufacturing cost, including foxed manufacturing overhead. Calculate the price that Wesco, Incorporated, would quote Zwinger Nursery for each 29,000 pound lot of the new compound, assuming that it is to be treated as a new product and this pricing policy is followed. Complete this question by entering your answers in the tabs below. Wesco has decided to submit a bid for the 29,000 pound order of Zwinger's new compound. The order must be delivered by the end of the current month. Zwinger has indicated that this is a one-time order that will not be repented. Calculate the lowest price that Wesco could bld for the order and still exactly cover its incremental manufocturing costs. (Round all Intermediate calculations and final answer to 2 decimal places.) Complete this question by entering your answers in the tabs below. Refer to the original data. Assume that zwinger Nursery plans to place regular orders for 29,000 -pound lots of the new compound. Wesco expects the demand for GrowNWeed to remain strong. Therefore, the recurting orders from Z winger would put Wesco over its two-shift capacity. However. production could be scheduled so that 60% of each Zwinger order could be completed during regular hours. As another option, some GrowNWeed production could be shifted temporarily to overtime so that the Zwinger orders could be produced on regular time. Current market prices are the best avallable estimates of future market prices. Wesco's standard markup policy for new products is 40% of the full manufacturing cost, including fixed manufacturing overhead. Calculate the price that Wesco, Incorporated, would quote Zwinger Nursery for each 29,000 pound lot of the new compound, assuming that it is to be treated as a new product and this pricing policy is followed. (Round your intermediate DUHs to the nearest whole hour. Round all other intermediate calculations and final answers to 2 decimal places.)