Question
Whispering Winds Inc. manufactures two electronic products, widgets and gadgets, and has a capacity of 1,500 machine hours. Prices and costs for each product are
Whispering Winds Inc. manufactures two electronic products, widgets and gadgets, and has a capacity of 1,500 machine hours. Prices and costs for each product are as follows:
Widget | Gadget | |||
---|---|---|---|---|
Selling price per unit | $255 | $335 | ||
Variable costs per unit | ||||
Direct materials | 35 | 40 | ||
Other direct costs | 15 | 17 | ||
Variable Manufacturing overhead costs* | 35 | 49 |
* Variable manufacturing overhead costs are applied at a rate of $45 per machine hour. Paver Industries, a potential client, has offered $254 per unit to Whispering Winds for 254 special units. These 254 units would incur the following production costs and time:
Direct materials | $8,756 | |
Other direct costs | $3,500 | |
Machine hours | 230 |
Assume that Whispering Winds has enough excess capacity to produce the special order. Calculate what the total contribution would be if the special order from Paver were accepted.
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