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Rudolph Corporation is a toy manufacturer. Lights, Inc. has approached Rudolph, as the company would like to sell a toy reindeer that is similar to
Rudolph Corporation is a toy manufacturer. Lights, Inc. has approached Rudolph, as the company would like to sell a toy reindeer that is similar to what Rudolph creates. Lights has offered to purchase 5,000 units. The following data is available: The toy reindeer costs the following to manufacture: direct materials, $49; direct labor, $30 (2 hours at $15 per hour); and manufacturing overhead, $82 (2 hours at $41 per hour) The normal selling price of the reindeer is $190, but Lights has only offered $110 because the company plans to order in large quantities. Lights needs a slight modification to the product that would reduce the direct material cost by $3. Rudolphs production manager has determined
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