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Wildhorse Inc. manufactures two electronic products, widgets and gadgets, and has a capacity of 2,200 machine hours. Prices and costs for each product are as
Wildhorse Inc. manufactures two electronic products, widgets and gadgets, and has a capacity of 2,200 machine hours. Prices and costs for each product are as follows: Widget Gadget Selling price per unit $262 $342 Variable costs per unit Direct materials 36 47 Other direct costs 16 24 Variable Manufacturing overhead costs* 42 56 * Variable manufacturing overhead costs are applied at a rate of $52 per machine hour. Penny Worth Industries, a potential client, has offered $262 per unit to Wildhorse for 262 special units. These 262 units would incur the following production costs and time: Direct materials $9,152 Other direct costs $4,200 Machine hours 237 Assume that Wildhorse has enough excess capacity to produce the special order. Calculate what the total contribution would be if the special order from Penny Worth were accepted. Total contribution margin $ Assume that Wildhorse is currently operating at full capacity. Calculate the contribution margin per unit and per machine hour. (Round machine hours to 2 decimal places, e.g. 12.25 and final answers to 0 decimal places, e.g. 125.) Widget Gadget New Order CM per unit $ $ $ CM per machine hour $ $ $ Determine whether Wildhorse should produce the units for the special order instead of widget or gadget units. Wildhorse produce the units for the special order instead of widget or gadget units. Assume that Wildhorse is actually operating at 95% of full capacity. Calculate what the opportunity cost would be if Penny Worth's special order were accepted. Opportunity cost $ Assume that Wildhorse is actually operating at 95% of full capacity, and additional machines can be rented at a cost of $36,200 to produce Penny Worth's special order. If the special order is accepted, calculate its effect on Wildhorse's profit. Net profit from doing the special order $
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