Axia Inc. manufactures two electronic products, widgets and gadgets, and has a capacity of 1,000 machine hours. Prices and costs for each product are as follows: Widget Gadget $250 $330 Selling price per unit Variable costs per unit Direct materials 30 35 Other direct costs 10 12 Manufacturing overhead costs* 30 44 * Variable manufacturing overhead costs are applied at a rate of $40 per machine hour. Bromont Industries, a potential client, has offered $250 per unit to Axia for 250 special units. These 250 units would incur the following production costs and time: Direct materials Other direct costs $8,000 $3,000 225 Machine hours Assume that Axia has enough excess capacity to produce the special order. Calculate what the total contribution would be if the special order from Bromont were accepted. Total contribution margin Assume that Axia is currently operating at full capacity. Calculate the contribution margin per unit and per machine hour. (Round answers to 0 decimal places, e.g. 125.) Widget Gadget New Order CM per unit CM per machine hour Determine whether Axia should produce the units for the special order instead of widget or gadget units. Axia produce the units for the special order instead of widget or gadget units. Assume that Axia is actually operating at 95% of full capacity. Calculate what the opportunity cost would be if Bromont's special order were accepted. Opportunity cost Assume that Axia is actually operating at 95% of full capacity, and additional machines can be rented at a cost of $35,000 to produce Bromont's special order. If the special order is accepted, calculate its effect on Axia's profit. Net profit from doing the special order Axia Inc. manufactures two electronic products, widgets and gadgets, and has a capacity of 1,000 machine hours. Prices and costs for each product are as follows: Widget Gadget $250 $330 Selling price per unit Variable costs per unit Direct materials 30 35 Other direct costs 10 12 Manufacturing overhead costs* 30 44 * Variable manufacturing overhead costs are applied at a rate of $40 per machine hour. Bromont Industries, a potential client, has offered $250 per unit to Axia for 250 special units. These 250 units would incur the following production costs and time: Direct materials Other direct costs $8,000 $3,000 225 Machine hours Assume that Axia has enough excess capacity to produce the special order. Calculate what the total contribution would be if the special order from Bromont were accepted. Total contribution margin Assume that Axia is currently operating at full capacity. Calculate the contribution margin per unit and per machine hour. (Round answers to 0 decimal places, e.g. 125.) Widget Gadget New Order CM per unit CM per machine hour Determine whether Axia should produce the units for the special order instead of widget or gadget units. Axia produce the units for the special order instead of widget or gadget units. Assume that Axia is actually operating at 95% of full capacity. Calculate what the opportunity cost would be if Bromont's special order were accepted. Opportunity cost Assume that Axia is actually operating at 95% of full capacity, and additional machines can be rented at a cost of $35,000 to produce Bromont's special order. If the special order is accepted, calculate its effect on Axia's profit. Net profit from doing the special order
