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Riel Company manufactures a variety of tool boxes. The firm is currently operating at 80% of its full capacity of 4,500 machine-hours per month. Each
Riel Company manufactures a variety of tool boxes. The firm is currently operating at 80% of its full capacity of 4,500 machine-hours per month. Each unit requires 30 minutes of machine time. Its sales manager has been looking for special orders to make productive use of the excess capacity. JCL. L.td., a potential customer, has offered to buy 10,000 tool boxes at $7.90 per box, provided that the entire quantity is delivered in two months. The current per-box cost data are as follows: Direct materials $2.60 Direct labour (X hour at $6.40// hour) 3.20 Total manufacturing overhead 2.10 Total unit product cost $7.90 Both fixed and variable overhead are allocated using direct labour-hours as a base. Variable overhead is $1.60
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