Superior currently produces and sells 15,000 sets of binolucars each month. Manufacturing capacity is 20,000 sets per month. Fixed costs per month Factory overhead Variable costs per set $450,000 Direct materials $80 Selling and administrative expense 375,000 Total Direct labor 50 $825,000 Factory overhead Distribution 35 10 $175 The distribution costs are to transport product to retail outlets. REQUIRED: Consider the effects of the changes presented in each of the following independent scenarios. What effect would the changes have on monthly profit and/or which decision should be made? Show the calculations, using the functionality of Excel, to support your answers. You may insert extra lines in the spreadsheet as needed. 4 A South American distributor proposes a special order for 6,000 sets of binoculars for $250 per set. The distributor would cover the transportation costs, but $1,000 of additional administrative costs would be incurred to fill the order. In this case, overtime production is not possible. 5 6 Every set of binoculars is delivered by Superior in a designer case. Superior has been approached by a local manufacturer who has offered to supply the cases on a one-year contract for $10 per case. Should the offer be accepted, Superior would be able to reduce variable manufacturing costs by 5%, reduce fixed costs by $5,000 each month, and lease out the manufacturing space saved for $4,000 per month. If Suuperior were to eliminate the option for lenses with a longer distance range, its variable costs could be reduced by $5 and factory overhead could be reduced by $50,000. However, the selling price would probably have to be reduced to an average of $290 per set.