The Dar es Salaam Lamp Factory produces a student reading table lamp

Annual production is 10,000 lamps. Currently sales are 8,000 lamps per

year. Per unit cost and revenue data are as follows:-

Price $2,400

Materials 900

Labour 300

Variable Overhead 300

Fixed Overhead 300

Sales Commissions 240

Profit per unit$360

Variable overhead varies directly with direct labour hours and overhead

rate equals the labour rate. Fixed overhead is applied at the rate of 100%

of direct labour costs and sales commissions are 10% of the selling price.

There is no sales commission s for special orders.

Required:

Treat each question below independently.

(i)Suppose Dar es Salaam Lamp Factory receives a special order

for1,000lampsfromanewcustomer.Thiswouldnotaffe

currentsales.Computetheminimumpricethefactoryshould

accept for this special order.

ii)Suppose Dar es Salaam Lamps Factory receives a special order for

3,000 lamps from a new customer. If the order is accepted, it must

be filled completely. Compute the minimum price the company

should accept.

(iii) Suppose that current excess capacity is used to repair lamps. The

repair business generates a total contribution margin of $300,000.

It is estimated that the existence of the repair business increases

sales of lamps by 2,000 units per year. If production exceeds 8,000

units, the repair business must be discontinued. How, if at all,

would this affect your answers to part (a) and (b) above