Problem $4-50($Algo$)$ Special Order $($LO $4-1,2)-$

Oakland Precision Products $($OPP$)$ manufactures and sells a variety of scales for the kitchen and office. OPP sells primarily to

kitchenware stores, discount stores, and so on$.$ Two of the scales it produces for kitchen use are the Cook and Baker. The Cook is a

basic food scale. The Baker has a greater capacity and special features that facilitate adjusting baking recipes for more or fewer

people. The following information is available:

The average wage rate is $$32$ per hour. Variable overhead varies with the quantity of direct labo,

$20,000$ direct labor$-$hours, but current production uses only $17,750$ direct labor$-$hours.

Required:

a$.$ A nationwide kitchenware chain has offered to buy $30,000$ Cook models and $15,000$ Baker models if the price is lowerec

and $$44\mathrm{.}00,$ respectively, per unit.

a$-1.$ If OPP accepts the offer, how many direct labor$-$hours will be required to produce the additional scales?

a$-2.$ Complete the following table to determine the differential profit increase $($or decrease$)$ if OPP accepts this proposal. Prices

regular sales will remain the same.

b$-1.$ Suppose that the kitchenware chain has offered instead to buy $50,000$ Cook models at $$13\mathrm{.}00$ per unit and $30,000$ Baker mc

at $$44\mathrm{.}00.$ This customer will purchase the models only in an all$-$or$-$nothing deal. That is$,$ OPP must provide all $50,000$ units of the

Cook model and $30,000$ units of the Baker model or nothing at all. In view of its capacity constraints, OPP will reduce sales to reg

customers as needed to fill the special order. Complete the table below to determine the total contribution margin with the special

order added.

b$-2.$ How much will the profits change if the order is accepted? Assume that the company cannot increase its production capacity to

meet the extra demand.

c$-1.$ Assume that, in the situation presented in requirement b$-1,$ the plant can work overtime. Direct labor costs for the overtime

production increase to $$45$ per hour. Variable overhead costs for overtime production are $$6$ per hour more than for normal

production. Complete the table below to determine the total contribution margin.

$c-2.$ How much will the profits change in this situation compared to the capacity constraints scenario in requirement b$-1?$

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