Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Wehrs Corporation has received a request for a special order of 9,700 units of product K19 for $47.20 each. The normal selling price of this
Wehrs Corporation has received a request for a special order of 9,700 units of product K19 for $47.20 each. The normal selling price of this product is $52.30 each, but the units would need to be modified slightly for the customer. The normal unit product cost of product K19 is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit product cost $ 18.00 7.30 4.50 7.40 $ 37.20 Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like some modifications made to product K19 that would increase the variable costs by $6.90 per unit and that would require a one-time investment of $46,700 in special molds that would have no salvage value. This special order would have no effect on the company's other sale The company has ample spare capacity for producing the special order. Required: Determine the effect on the company's total net operating income of accepting the special order. Brissett Corporation makes three products that use the current constraint, which is a particular type of machine. Data concerning those products appear below: XK Selling price per unit Variable cost per unit Time on the constraint (minutes) GK $ 326.35 $ 251.93 2.80 LQ $ 543.61 $ 420.74 6.80 $ 497.00 $ 397.59 8.00 Required: a. Rank the products in order of their current profitability from the most profitable to the least profitable. In other words, rank the products in the order in which they should be emphasized. b. Assume that sufficient constraint time is available to satisfy demand for all but the least profitable product. Up to how much should the company be willing to pay to acquire more of the constrained resource? (Round your answer to 2 decimal places.) Ranking a. GK a. LQ a. XK b. Maximum amount
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started