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Replica Products (RP) manufactures miniature models of airplanes, trains and automobiles as promotional items for corporate customers. A newly formed airline has approached RP to
Replica Products (RP) manufactures miniature models of airplanes, trains and automobiles as promotional items for corporate customers. A newly formed airline has approached RP to make 500 models of its new livery (logo design) on a model Boeing 737, which it will send to travel agencies to serve as a marketing tool. RPs current per unit cost on Boeing 737 models is direct materials $9; direct labour $6; variable manufacturing overhead $3; fixed manufacturing overhead $6. Such models are normally priced at $35.00/unit. Incorporating the new airline's livery into the production will require an additional cost of $733. As the newly formed airline is rather cash poor, it is asking RP to make this one-time production run for $27/unit. Assuming RP has the capacity and other orders would not be affected, how much total profit would RP earn from this special order? Question 8Answer a. $4,500 b. $3,767 c. $5,000 d. $767
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