Stitchy Inc makes cloth face masks. The masks sell for $5 each. Each mask requires $1 of fabric, $2 of direct labor and $.50 of variable overhead Fixed overhead is $150, allocated over budgeted production of 200 masks. Stitchy's capacity allows them to make a maximum of 250 masks Currently, Stitchy makes and sells 200 masks per period. Stitchy has variable selling expenses of $.05 per unit and Fixed Selling expenses of $40 Product Face Masks Cost Information Units $ Sales Direct materials Direct labor Variable OH Fixed OH -allocated Total cost Variable selling expense Fixed selling expense A new customer wishes to buy 25 masks, but is asking for a bulk discount They propose to pay $4.50 per mask. Sales DM DL Var OH Var Selling Total Variable Costs Contribution Margin Another new customer wishes to buy 40 masks for $4.00 per mask Sales DM DL Var OH Var Selling Total Variable Costs Contribution Margin Assuming neither of these new orders would impact Stitchy's existing client base, Stitchy Inc makes cloth face masks. The masks sell for $5 each. Each mask requires $1 of fabric, $2 of direct labor and $.50 of variable overhead Fixed overhead is $150, allocated over budgeted production of 200 masks. Stitchy's capacity allows them to make a maximum of 250 masks Currently, Stitchy makes 200 masks per period. Stitchy has variable selling expenses of S.OS per unit and Fixed Selling expenses of $40 Stitchy has found that about 20% of the time, the elastic in the masks is not properly sewn, making the masks unsellable. They have found a quilting shop that will buy the broken masks for $0.50/each. Alternatively, Stitchy can rework the masks and sell them at full price. Reworking the masks requires $0.25 of elastic, $0.80 of direct labor and $0.25 of variable Overhead. Should Stitchy rework the masks or sell them as scrap to the quilting shop? U we scrap: # of expected defective units Proceeds from selling defective units for scrap Uf we rework: # of expected defective units Incremental DM Incremental DU Incremental Var OH Total Incremental costs Sales at Full Price Less Incremental Cost Proceeds from reworking defective units At what price from the quilting shop would Stitchy be willing to sell their scrap instead of reworking