Kingbird Inc. manufactures two electronic products, widgets and gadgets, and has a capacity of 2.500 machine hours. Prices and costs for each product are as follows: Widget Gadget Selling price per unit $265 $345 Variable costs per unit Direct materials 32 50 Other direct costs 12 27 Variable Manufacturing overhead costs 45 59 *Variable manufacturing overhead costs are applied at a rate of $55 per machine hour. Accustart Industries, a potential client, has offered $265 per unit to Kingbird for 265 special units. These 265 units would Incur the following production costs and time Direct materials $9.595 Other direct costs $4,500 Machine hours 240 (a) Your answer is correct Assume that Kingbird has enough excess capacity to produce the special order. Calculate what the total contribution would be if the special order from Accustart were accepted. Total contribution margin 5 42930 Assume that Kingbird is currently operating at full capacity. Calculate the contribution margin per unit and per machine hour.
Kingbird Inc. manufactures two electronic products, widgets and gadgets, and has a capacity of 2.500 machine hours. Prices and costs for each product are as follows: Widget Gadget Selling price per unit $265 $345 Variable costs per unit Direct materials 32 50 Other direct costs 12 27 Variable Manufacturing overhead costs 45 59 *Variable manufacturing overhead costs are applied at a rate of $55 per machine hour. Accustart Industries, a potential client, has offered $265 per unit to Kingbird for 265 special units. These 265 units would Incur the following production costs and time Direct materials $9.595 Other direct costs $4,500 Machine hours 240 (a) Your answer is correct Assume that Kingbird has enough excess capacity to produce the special order. Calculate what the total contribution would be if the special order from Accustart were accepted. Total contribution margin 5 42930 Assume that Kingbird is currently operating at full capacity. Calculate the contribution margin per unit and per machine hour.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Kingbird Inc. manufactures two electronic products, widgets and gadgets, and has a capacity of 2.500 machine hours. Prices and costs
for each product are as follows:
Widget
Gadget
Selling price per unit
$265
$345
Variable costs per unit
Direct materials
32
50
Other direct costs
12
27
Variable Manufacturing overhead costs
45
59
*Variable manufacturing overhead costs are applied at a rate of $55 per machine hour.
Accustart Industries, a potential client, has offered $265 per unit to Kingbird for 265 special units. These 265 units would incur the
following production costs and time
Direct materials
$9.595
Other direct costs
$4,500
Machine hours
240
(a)
Your answer is correct
Assume that Kingbird has enough excess capacity to produce the special order. Calculate what the total contribution would be if
the special order from Accustart were accepted.
Total contribution margin
42930
Assume that Kingbird is currently operating at full capacity. Calculate the contribution margin per unit and per machine hour.
(Round machine hours to 2 decimal places, eg. 12.25 and final answers to O decimal places, eg. 125)
CM per unit
CM per machine hour
Widget
176
215
Gadget
New Order
209
195
Determine whether Kingbird should produce the units for the special order instead of widget or gadget units
Kingbird should not produce the units for the special order instead of widget or gadget units.
Assume that Kingbird is actually operating at 95% of full capacity. Calculate what the opportunity cost would be if
Accustart's special order were accepted.
Opportunity cost
162
178
Assume that Kingbird is actually operating at 95% of full capacity, and additional machines can be rented at a cost of
$36.500 to produce Accustart's special order. If the special order is accepted. calculate its effect on Kingbird's proft
Net profit from doing the special order
$
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