15:04 ezto.mheducation.com Turk Telekom 9616 + Wesco Incorporated\'s only produc

Question

15:04 ezto.mheducation.com Turk Telekom 9616 + 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 32,000- pound order of the private brand compound to Zwinger. While the chemical composition of the Zwinger compound differs from that of GrowNWeed, the manufacturing processes are very similar The Zwinger compound would be produced in 1,000-pound lots. Each lot would require 40 direct labor-hours and the following chemicals: KL-2 270 OF-6 230 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 that Wesco discontinued several months ago. The supply of DF-6 that 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 $0.10 per pound selling and handling expenses. Wesco also has on hand a chemical called BH-3, which was manufactured for use in another product that is 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 $430 Inventory and cost data for the chemicals that can be used to produce the Zwinger compound are shown below: Actual Price Current per Pound Market 0.70 50.42 $1.40 0.55 0.67 $0.80 $0.47 $1.60 CW-7 9,000 5.300 Bitti

Explanation / Answer

part 1

The lowest price Wesco could bid for the one-time special order of 32,000 pounds (32 lots) without losing money would be $53498, as shown below:

Part 2

Selling price (full manufacturing cost plus markup) = 89779.20

  Direct materials:   AG-5: 340 pounds per lot × 32 lots = 10880 pounds.     Substitute BH-3 on a one-for-one basis to its total of 5,300 pounds. If BH-3 is not used in     this order, it will be salvaged for $430. Therefore, the relevant cost is $ 430.00     The remaining (10880-5300)=5580 pounds would be AG-5 at a cost of $0.80 per pound 4464.00   KL-2: 270 pounds per lot × 32 lots = 8,640 pounds at $0.47 per pound 4060.80   CW-7: 160 pounds per lot × 32 lots = 5120 pounds at $1.60 per pound 8192.00   DF-6: 230 pounds per lot × 32 lots = 7360 pounds. Use 5960 pounds in inventory at   $0.42 per pound ($.52 market price – $.10 handling charge), purchase the remaining (7360-5960) = 1400 3231.20   pounds at $.52 per pound    Total direct materials cost $ 20378.00   Direct labor: 40 DLHs per lot × 32 lots = 1280 DLHs. Because only 420 hours can be    scheduled during regular time this month, overtime would have to be used for the    remaining 860 hours.   420 DLHs × $16.00 per DLH $ 6720.00    860 DLHs × $24.00 per DLH 20640.00    Total direct labor cost $ 27360.00   Overhead: This special order will not increase fixed overhead costs. Therefore, only the    variable overhead is relevant.   1280 DLHs × $4.50 per DLH $ 5760.00    Total relevant cost of the special order $ 53498.00

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.