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WASHINGTON Company manufactures and sells face masks at its retail store in Singapore. The average production and sales are 500,000 boxes per month. The company
WASHINGTON Company manufactures and sells face masks at its retail store in Singapore. The average production and sales are 500,000 boxes per month. The company has the capacity to produce up to 550,000 boxes per month. The unit cost of production and selling based on 550,000 boxes per month is given below: Direct materials $0.50 Direct manufacturing labor 0.05 Variable manufacturing overhead 0.10 Fixed manufacturing overhead 0.30 Variable selling 0.15 Fixed selling 0.20 Total $1.30 The company sells its face masks at $2 per box. Recently, a major customer had approached WASHINGTON Company and proposed a contract deal to buy 80,000 boxes of face masks per month at $1.20 each. a) Compute the variable cost per box of face masks. (3 marks) b) Compute the total fixed cost per month. (3 marks) c) Compute the contribution margin per box of face masks and the total profit of manufacturing and selling 500,000 boxes of face masks per month. (5 marks) d) Compute the extra profit (or loss) if WASHINGTON Company accept the special order. (3 marks) e) Explain whether WASHINGTON Company should accept the special order. (6 marks)
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