Moore Company manufactures and sells a single product called a Lop. Operating at capacity, the

company can produce and sell $30,000$ Lops per year. Costs associated with this level of production and

sales are given below:

The Lops normally sell for $$50$ each. Fixed manufacturing overhead is constant at $$270,000$ per year

within the range of $25,000$ through $30,000$ Lops per year.

Requirements:

Refer to the original data. Assume again that Moore Company expects to sell only $25,000$ Lops

through regular channels next year. The provincial government would like to make a one$-$time$-$

only purchase of $5,000$ Lops. The government would pay a fixed fee of $$1\mathrm{.}80$ per Lop, and it would

reimburse Moore Company for all costs of production $($variable and fixed$)$ associated with the

units. Since the government would pick up the Lops with its own trucks, there would be no

variable selling expenses associated with this order.

$[$Hint: There is excess capacity and available production room for the special order.$]$

$($a$)$ Calculate the total production cost per unit $($i$.$e$.,$ total manufacturing cost per unit$).$

$($b$)$ If Moore Company accepts the order, by how much will profits increase or decrease for the

year? $[$Use the same hints from Requirement #$1$ again to assist you with this analysis.$]$