Sports Medals manufactures medals and trophies for winners of athletic competitions and other contests. Sports Medals' manufacturing plant has the capacity to produce 10,000 medals per month. Currently, Sports Medals is operating at 75% of available capacity, producing 7,500 medals per month. Pertinent data for this level of operations follows:

Medals produced and sold

8,000

Selling price

$140 per medal

Fixed costs:^*

Manufacturing

$46 per medal

Marketing & administrative

$34 per medal

Variable costs:

Direct materials

$50 per medal

Direct labor

$40 per medal

Profit

$5 per medal

Sports Medals calculates fixed costs per medal by dividing the annual fixed cost by the number of medals it expects to produce during the year.

Recently, Sports Medals received an inquiry from a national Little League baseball organization about the possibility of producing 1,800 medals next month. The Little League organization plans to give the medals to the winners of the upcoming state tournaments. Since there are 50 states, 3 age brackets, and approximately 12 players per team, the organization needs 1,800 medals (i.e., 1,800 = 50 * 3 *12). The Little League organization, however, indicates that they are somewhat strapped for cash and can only pay $100 for each medal.

Medals produced and sold 8,000 Selling price $140 per medal Fixed costs:* Manufacturing $46 per medal Marketing & administrative $34 per medal Variable costs: Direct materials $50 per medal Direct labor $40 per medal Profit $5 per medal Sports Medals calculates fixed costs per medal by dividing the annual fixed cost by the number of medals it expects to produce during the year