What are the answers to the two blue boxes? (required 1 and 2) **Wesco Incorporated: Cost Analysis and Production Planning for GrowNWeed Fertilizer/Weedkiller****Overview:**Wesco Incorporated creates a fertilizer/weedkiller called GrowNWeed, sold primarily to nurseries and garden stores. Zwinger Nursery plans to sell a similar product, asking Wesco to manufacture and deliver a 32,000-pound order, leveraging a compound known as Zwinger.**Chemical Requirements:**Each 1,000-pound lot of Zwinger requires:- AG-5: 300 pounds- KL-2: 290 pounds- CW-7: 120 pounds- DF-6: 290 poundsAG-5, KL-2, and CW-7 are also used in GrowNWeed, while DF-6, from a discontinued product, can be sold at $0.09 per pound. Another chemical, BH-3, with a salvage value of $590, is substitutable for AG-5.**Inventory and Costs:** | Raw Material | Pounds in Inventory | Actual Price per Pound When Purchased | Current Market Price per Pound ||--------------|---------------------|--------------------------------------|------------------------------|| AG-5 | 18,000 | $0.78 | $0.88 || KL-2 | 5,400 | $0.42 | $0.47 || CW-7 | 8,200 | $1.28 | $1.48 || DF-6 | 7,800 | $0.48 | $0.52 || BH-3 | 4,600 | $0.59 (Salvage) | - |**Labor and Overhead:**- Direct labor rate: $14 per hour.- Predetermined overhead rate: $12.50 per direct labor hour (DLH).**Production Constraints:**Equipment is sufficient for Zwinger without affecting overhead. Additional production beyond 120 hours requires overtime at $21 per hour.**Objectives:**1. **Bidding Strategy:** - Calculate the lowest bid for the 32,000-pound order, covering incremental costs as it won’t be repeated.2. **Long-term Production Planning:** - Consider future orders under regular demand conditions. - Wesco would need to balance production between GrowN

Solution 1: Chemicals Pounds per Lot Pounds required for 32 lots AG-5 300 9600 KL-2 290 9280 CW-7 120 3840 DF-6 290 9280 Computation of Total Direct Material Cost Pounds Current Market Price Total Cost for AG-5: BH-3 (substitute from inventory) 4600 Salvage Value $590.00 AG-5 (9600-4600) 5000 $0.88 $4,400.00 Cost for KL-2 9280 $0.47 $4,361.60 Cost for CW-7 3840 $1.48 $5,683.20 Cost for DF-6: From Inventory DF-6 (0.52-0.09) 7780 $0.43 $3,345.40 Remaining pounds 1500 $0.52 $780.00 Total Cost of Direct Materials $19,160.20 Computation Direct labor Cost Hours Per lot Hours required for 32 lots Total Direct Labor Hours 31 992 Less: Regular working Hours 120 Overtime working hours 872 Direct Labor Cost: Hours Rate Total For regular working Hours 120 $14.00 $1,680.00 For Overtime working Hours 872 $21.00 $18,312.00 Total Direct Labor cost $19,992.00 Variable Overehad cost Hours Rate Total Variable overhead cost 992 $4.50 $4,464.00 Computation of Lowest Bid Price for Zwinger's Order Total Cost of Direct Materials $19,160.20 Total Direct Labor cost $19,992.00 Variable overhead cost $4,464.00 Lowest Bid Price $43,616.20 Solution 2: Computation of Total Direct Material Cost Pounds Current Market Price Total Cost for AG-5 9600 $0.88 $8,448.00 Cost for KL-2 9280 $0.47 $4,361.60 Cost for CW-7 3840 $1.48 $5,683.20 Cost for DF-6: 9280 $0.52 $4,825.60 Total Cost of Direct Materials $23,318.40 Direct Labor Cost: Hours Rate Total For regular working Hours (992*60%) 595 $14.00 $8,330.00 For Overtime working Hours 397 $21.00 $8,337.00 Total Direct Labor cost $16,667.00 Manufacturing Overehad cost Hours Rate Total Variable overhead cost 992 $4.50 $4,464.00 Fixed overhead cost 992 $8.00 $7,936.00 Total Overhead cost $12,400.00 Computation of Lowest Bid Price for Zwinger's Order Total Cost of Direct Materials $23,318.40 Total Direct Labor cost $16,667.00 Variable overhead cost $12,400.00 Full Manufacturing Costs $52,385.40 Add: Markup (40%) $20,954.16 Price to be quoted $73,339.56

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(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 31 direct labor- hours and the following chemicals: ChemicalsQuantirty in Pounds AG-5 KL-2 300 290 Wesco's production manager reports that the present equipment and facilities are adequate the Zwinger compound. Therefore, the order would have no effect on total fixed manufacturing o costs. However, Wesco is within 120 hours of its two-shift capacity this month. Any additional hou beyond the 120 hours must be done in overtime. If need be, the Zwinger compound could be prod regular time by shifting a portion of GrowNWeed production to overtime. Wesco's direct labor wa for overtime is $21 per hour. There is no allowance for any overtime premium in the predetermine overhead rate. CW-7 120 oman DF-6 290 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 $0.09 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 $590. Required: 1. Wesco has decided to submit a bid for the 32,000 pound order of Zwinger's new compound. Th must be delivered by the end of the current month. Zwinger has indicated that this is a one-time or will not be repeated. Calculate the lowest price that Wesco could bid for the order and still exactly incremental manufacturing costs. Inventory and cost data for the chemicals that can be used to produce the Zwinger compound are shown below: Actual Price per Pound When Purchased $0.78 $0.42 $1.28 $0.48 $0.59 2. Refer to the original data. Assume that Zwinger Nursery plans to place regular orders for 32,000 lots of the new compound. Wesco expects the demand for GrowNWeed to remain strong. Therefe recurring orders from Zwinger would put Wesco over its two-shift capacity. However, production scheduled so that 60% of each Zwinger order could be completed during regular hours. As anothe some GrowNWeed production could be shifted temporarily to overtime so that the Zwinger orden be produced on regular time. Current market prices are the best available estimates of future marke Current Market Pounds in Raw Material Inventory 18,000 5,400 8,200 7,780 4,600 Price per Pound $0.88 $0.47 $1.48 $0.52 (Salvage) AG-5 KL-2 CW-7 DF-6 BH-3 Wesco's standard markup policy for new products is 40% of the full manufacturing cost, including manufacturing overhead. Calculate the price that Wesco, Inc., would quote Zwinger Nursery for ea pound lot of the new compound, assuming that it is to be treated as a new product and this pricing followed. The current direct labor wage rate is $14 per hour. The predetermined overhead rate is based on direct labor-hours (DILH). The predetermined overhead rate for the current year, based on a two-shift capacity with no overtime, is as follows: Lowest price (32,000 pound bid) 1 Variable manufacturing overhead Fixed manufacturing overhead $ 4.50 per DILH 8.00 per DLH S12.50 per DLH Selling price (32,000 pound bid) Combined predetermined overhead rate