Wesco Incorporated$$s only product is a combination fertilizer$/$weedkiller called GrowNWeed. GrowNWeed is sold nationwide to retail nurseries and garden stores.

Zwinger Nursery plans to sell a similar fertilizer$/$weedkiller compound through its regional nursery chain under its own private label. Zwinger does not have manufacturing facilities of its own, so it has asked Wesco $($and several other companies$)$ to submit a bid for manufacturing and delivering a $20,000-$pound order of the private brand compound to Zwinger. While the chemical composition of the Zwinger compound differs from GrowNWeed, the manufacturing processes are very similar.

The Zwinger compound would be produced in $1,000-$pound lots. Each lot would require $25$ direct labor$-$hours and the following chemicals:

Table Summary: A table has two columns. Columns $1$ and $2$ are titled Chemicals and Quantity in Pounds, respectively.

Chemicals Quantity in Pounds

AG$-5300$

KL$-2200$

CW$-7150$

DF$-6175$

The first three chemicals $($AG$-5,$ KL$-2,$ and CW$-7)$ are all used in the production of GrowNWeed. DF$-6$ was used in another compound Wesco discontinued several months ago. The supply of DF$-6$ Wesco had on hand when the other compound was discontinued was not discarded. Wesco could sell its supply of DF$-6$ at the prevailing market price less $$0\mathrm{.}10$ per pound selling and handling expenses.

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Wesco also has on hand a chemical called BH$-3,$ which was manufactured for use in another product no longer produced. BH$-3,$ which cannot be used in GrowNWeed, can be substituted for AG$-5$ on a one$-$for$-$one basis without affecting the quality of the Zwinger compound. The BH$-3$ in inventory has a salvage value of $$600.$

Inventory and cost data for the chemicals that can be used to produce the Zwinger compound are shown below:

Table Summary: A table has four columns. Columns $1$ to $4$ are titled Raw Material, Pounds in Inventory, Actual Price per Pound when Purchased, and Current Market Price per Pound, respectively.

Raw Material Pounds in

Inventory Actual Price

per Pound

When

Purchased Current

Market Price

per Pound

AG$-518,000$ $$1\mathrm{.}15$ $$1\mathrm{.}20$

KL$-26,000$ $$1\mathrm{.}10$ $$1\mathrm{.}05$

CW$-77,000$ $$1\mathrm{.}35$ $$1\mathrm{.}35$

DF$-63,000$ $$0\mathrm{.}80$ $$0\mathrm{.}70$

BH$-33,500$ $$0\mathrm{.}90($Salvage$)$

The current direct labor wage rate is $$14$ per hour. The predetermined overhead rate is based on direct labor$-$hours $($DLH$).$ For the current year, based on a two$-$shift capacity with no overtime, the rate is as follows:

Table Summary: A table has two columns. Column $1$ lists account names, while Column $2$ lists dollar amounts.

Variable manufacturing overhead $$3\mathrm{.}00$ per DLH

Fixed manufacturing overhead $10\mathrm{.}50$ per DLH

Combined predetermined overhead rate $$13\mathrm{.}50$ per DLH

Wesco$$s production manager says the present equipment and facilities are adequate to manufacture the Zwinger compound. Therefore, the order would have no effect on total fixed manufacturing overhead costs. However, Wesco is within $400$ hours of its two$-$shift capacity this month. Any additional hours beyond the $400$ hours must be done in overtime. If need be$,$ the Zwinger compound could be produced on regular time by shifting a portion of GrowNWeed production to overtime. Wesco$$s direct labor wage rate for overtime is $$21$ per hour. There is no allowance for any overtime premium in the predetermined overhead rate.

Required:

Wesco decided to submit a bid for the $20,000-$pound order of Zwinger$$s new compound. The order must be delivered by the end of the current month. Zwinger noted this is a one$-$time order that will not be repeated. Calculate the lowest price Wesco could bid for the order and still exactly cover its incremental manufacturing costs.

Refer to the original data. Assume Zwinger Nursery plans to place regular orders for $20,000-$pound lots of the new compound. Wesco expects the demand for GrowNWeed to remain strong. Therefore, the recurring orders from Zwinger would put Wesco over its two$-$shift capacity. However, production could be scheduled so that $90\%$ of each Zwinger order could be completed during regular hours. As another option, some GrowNWeed production could be shifted temporarily to overtime so the Zwinger orders could be produced on regular time. Current market prices are the best available estimates of future market prices. Wesco$$s standard markup percentage for new products is $40\%$ of the full manufacturing cost, including fixed manufacturing overhead. Calculate the price Wesco, Inc., would quote Zwinger Nursery for each $20,000-$pound lot using the standard markup percentage.