B & B makes a single product which sells for $20 and for which there is a great demand. The variable cost comprises: $ Direct material 4 Direct labour (2 hours) 6 Variable overhead 2 Total variable cost 12 The workers are currently operating at full capacity and no extra hours is available. A customer approached B & B with a request for the manufacture of a special order for which he is willing to pay $5500. The costs of the special order would be $2000 for direct materials, and 5000 labour hours will be required. Advise B & B whether the order should be accepted.
B & B makes a single product which sells for $20 and for which there is a great demand. The variable cost comprises:
$
Direct material 4
Direct labour (2 hours) 6
Variable overhead 2
Total variable cost 12
The workers are currently operating at full capacity and no extra hours is available.
A customer approached B & B with a request for the manufacture of a special order for which he is willing to pay $5500.
The costs of the special order would be $2000 for direct materials, and 5000 labour hours will be required.
Advise B & B whether the order should be accepted.
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