The materials purchasing manager purchased $12,000$ units of component K$2$X from a new source at a price $$20$ below the standard unit price of $$200.$ These components turned out to be of extremely poor quality with defects occurring at three times the standard rate of $6\%.$ The higher rate of defects reduced the output of workers $($who earn $$12$ per hour$)$ from $20$ units per hour to $16$ units per hour on the units containing the discount components. Each finished unit contains one K$2$X component. To appease the workers $($who were irate at having to work with inferior components$),$ the production manager agreed to pay the workers an additional $$0\mathrm{.}50$ for each of the components $($good and bad$)$ in the discount batch. Variable manufacturing overhead is applied at the rate of $$6\mathrm{.}00$ per direct labor hour. The defective units also caused a $25$ hour increase in total machine hours. The actual cost of electricity to run the machines is $$2\mathrm{.}00$ per hour.

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