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Tamarisk Inc. manufactures two electronic products, widgets and gadgets, and has a capacity of 2,000 machine hours. Prices and costs for each product are as
Tamarisk Inc. manufactures two electronic products, widgets and gadgets, and has a capacity of 2,000 machine hours. Prices and costs for each product are as follows: Widget Gadget $260 $340 Selling price per unit Variable costs per unit Direct materials 34 45 Other direct costs 14 22 Variable Manufacturing overhead costs* 40 54 * Variable manufacturing overhead costs are applied at a rate of $50 per machine hour. Oak Industries, a potential client, has offered $259 per unit to Tamarisk for 259 special units. These 259 units would incur the following production costs and time: Direct materials $8,855 Other direct costs $4,000 Machine hours 235 Assume that Tamarisk has enough excess capacity to produce the special order. Calculate what the total contribution would be if the special order from Oak were accepted. Total contribution margin $ Assume that Tamarisk is currently operating at full capacity. Calculate the contribution margin per unit and per machine hour. (Round machine hours to 2 decimal places, e.g. 12.25 and final answers to 0 decimal places, e.g. 125.) Widget Gadget New Order CM per unit $ $ $ CM per machine hour $ $ $ Determine whether Tamarisk should produce the units for the special order instead of widget or gadget units. Tamarisk produce the units for the special order instead of widget or gadget units. Assume that Tamarisk is actually operating at 95% of full capacity. Calculate what the opportunity cost would be if Oak's special order were accepted. Opportunity cost $ Assume that Tamarisk is actually operating at 95% of full capacity, and additional machines can be rented at a cost of $36,000 to produce Oak's special order. If the special order is accepted, calculate its effect on Tamarisk's profit. Net profit from doing the special order
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