Metlock is the creator of Y-Go, a technology that weaves silver into fabrics to kill bacteria and odour on clothing while managing heat.

Y-Go has become very popular in undergarments for sports activities. Operating at capacity, the company can produce 1,000,000 Y Go undergarments each year. The per-unit and total costs for the undergarment are as follows:

Direct materials

Direct labour

Variable manufacturing overhead

Fixed manufacturing overhead

Variable selling expenses

Total

Per Undergarment

$2.25

0.50

0.85

1.65

0.40

$5.65

Total

$2.250.000

500.000

850.000

1.650.000

400.000

$5,650,000

The Canadian Armed Forces (CAF) has approached Metlock and expressed an interest in purchasing 220,000 -Go undergarments for soldiers stationed in extremely warm climates. The CAF would pay the unit cost for direct materials, direct labour, and variable manufacturing overhead costs. In addition, the CAF has agreed to pay an additional $1 per undergarment to cover all other costs and provide a profit. Presently, Metlock is operating at 75% capacity and does not have any other potential buyers for Y-Go. If Metlock accepts the CAF's offer, it will not incur any variable selling expenses for this order.

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10-07-202