What are the lowest price (32,000 pound bid) and the selling price (32,000 pound bid)? Title: Cost Analysis and Strategy for Zwinger Compound Production**Wesco Incorporated’s Production Strategy**Wesco Incorporated is producing a combination fertilizer/weedkiller called GrowNWeed, sold to nurseries and garden stores. Zwinger Nursery intends to sell a similar compound and has approached Wesco to manufacture it, given their similar production processes.**Chemical Requirements for Zwinger Compound**The Zwinger compound is produced in 1,000-pound lots, requiring 31 direct labor-hours and specific chemicals:- AG-5: 300 pounds- KL-2: 290 pounds- CW-7: 120 pounds- DF-6: 290 poundsWhile AG-5, KL-2, and CW-7 are used in GrowNWeed, DF-6 was used in a discontinued product but remains in inventory. Wesco could market DF-6 externally for $0.09/pound to offset handling costs. Additionally, BH-3, a chemical with a salvage value of $590, can substitute for AG-5.**Inventory and Cost Analysis**Below is the inventory and cost data for manufacturing the Zwinger compound:| Raw Material | Pounds in Inventory | Actual Price per Pound | 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 | 7,780 | $0.48 | $0.52 || BH-3 | 4,600 | $0.59 (Salvage) | |The direct labor wage rate is $14 per hour with a predetermined overhead rate of $12.50 per direct labor-hour.**Production Capacity and Costs**Wesco’s equipment is adequate, but current capacity is near the limit, requiring overtime for extra work at $21/hour.**Bid Requirements and Market Strategy**1. Wesco aims to bid for a 32,000-pound order of Zwinger’s compound. The bid must cover costs using the incremental cost method.2. For ongoing production, evaluate regular order impacts and current

Cost-up pricing: In the cost-up pricing method, the selling price or a bid price is made based on the total costs incurred in manufacturing a product. A fixed markup percentage is added to the total cost to arrive at the selling price. Pricing differentials on special order bids: If a company has excess capacity, it can take on additional, one-time orders to make proper use of its resources. In such cases, the company can choose to bid with a lower selling price by taking the fixed cost overheads out of the picture. Determining the fixed cost, variable costs, and the total manufacturing costs: The costs that vary with the number of units produced are known as variable costs, while those that remain fixed irrespective of the costs manufactured are known as fixed costs. The total manufacturing costs are computed as the total fixed and variable costs.Computing the direct material, direct labor, and manufacturing overhead costs: Computing the bid price: The bid price is computed as: Calculating the selling price:Answer: The lowest bid price for 32,000 pounds is $54,279.68. The selling price for 32,000 pounds is $65,390.08.

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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 31 direct labor- hours and the following chemicals: ChemicalsQuantity in Pounds AG-5 KL-2 300 290 Wesco's production manager reports that the present equipment and facilities are adequate to manufacture the Zwinger compound. Therefore, the order would have no effect on total fixed manufacturing overhead costs. However, Wesco is within 120 hours of its two-shift capacity this month. Any additional hours beyond the 120 hours must be done in overtime. If need be, the Zwinger compound could be produced on regular time by shifting a portion of GrowNWeed production to overtime. Wesco's direct labor wage rate for overtime is $21 per hour. There is no allowance for any overtime premium in the predetermined overhead rate. CW-7 120 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. The order must be delivered by the end of the current month. Zwinger has indicated that this is a one-time order that will not be repeated. Calculate the lowest price that Wesco could bid for the order and still exactly cover its incremental manufacturing costs. Inventory and cost data for the chemicals that can be used to produce the Zwinger compound are shown below: 2. Refer to the original data. Assume that Zwinger Nursery plans to place regular orders for 32,000-pound lots of the new compound. Wesco expects the demand for GrowNWeed to remain strong. Therefore, the recurring orders from Zwinger would put Wesco over its two-shift capacity. However, production could be scheduled so that 60% of each Zwinger order could be completed during regular hours. As another option, some GrowNWeed production could be shifted temporarily to overtime so that the Zwinger orders could be produced on regular time. Current market prices are the best available estimates of future market prices. Actual Price Current per Pound Market Pounds in When Price per Pound $0.88 $0.47 $1.48 Purchased $0.78 Raw Material Inventory 18,000 5,400 8,200 7,780 4,600 AG-5 KL-2 $0.42 $1.28 $0.48 $0.59 CW-7 DF-6 $0.52 Wesco's standard markup policy for new products is 40% of the full manufacturing cost, including fixed manufacturing overhead. Calculate the price that Wesco, Inc., would quote Zwinger Nursery for each 32,000 pound lot of the new compound, assuming that it is to be treated as a new product and this pricing policy is followed. BH-3 (Salvage) 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 $12.50 per DLH Selling price (32,000 pound bid) 2. Combined predetermined overhead rate