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Question4(6marks)One of the products(Product 17L)manufactured by Weslong Corp. (Weslong) has thefollowing costper unit:Direct materials$12Direct labour (1 hour)25Overhead (1 hour)40$77Fixed overhead allocated toProduct 17Lis $250,000 per
Question4(6marks)One of the products(Product 17L)manufactured by Weslong Corp. (Weslong) has thefollowing costper unit:Direct materials$12Direct labour (1 hour)25Overhead (1 hour)40$77Fixed overhead allocated toProduct 17Lis $250,000 per year and is based onWeslong's estimated production capacity of 10,000 hours. Current production and salesofProduct 17Lare8,000unitsper year. The current price forProduct 17Lis $130perunit.Weslong was approached by a potential customer who wants to place a special orderfor 4,000 units of a product that would be very similar toProduct 17L. The special orderwould be produced in the same facility asProduct 17L. The only difference is thatthespecial-order product would require only 0.75 direct labour hours per unit. The potentialcustomer has offered a price of $80 per unit. If the special order is accepted, Weslongwould incur a one-time setup cost of $18,000.Required:a)Calculate the incremental income to Weslong if the special order is accepted.(5 marks)b)Recommend whether Weslong should accept the special order, and explain why orwhy not.
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