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Wood Group manufactures hummingbird feeders and ships them to customers throughout Canada. The selling price is $35 per feeder with the production and selling costs
Wood Group manufactures hummingbird feeders and ships them to customers throughout Canada. The selling price is $35 per feeder with the production and selling costs per unit shown below. Direct Materials $10.00 Direct Labour $12.00 Variable manufacturing overhead $0.50 Fixed manufacturing overhead $2.00 Variable selling and administrative expenses $1.50 Fixed selling and administrative expenses $2.00 Production capacity is 1,000 feeders per month and current demand is 800 units. A non-profit bird sanctuary in Ottawa has contacted the company and wants to place an order for 100 units. Because of limited funding, the most they can pay is $25 per feeder. Neither fixed manufacturing expenses nor fixed selling and administrative expenses will be affected by the special order. Because the company was approached by the bird sanctuary, no variable selling and administrative expenses would be incurred to fill the order. Required 1. Should Wood Group accept the special order at $25 per feeder? Why or why not? 2. If the order is accepted, by how much will monthly profits increase or decrease? 3. Now assume that the company is operating at capacity, producing and selling 1,000 feeders per month. What unit cost is relevant for establishing a minimum selling price for
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