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Grant Industries a manufacturer of electronic parts has recently received an invitation to bid on a special order for 23500 units of one of its most popular products Grant currently manufactures

Grant Industries, a manufacturer of electronic parts, has recently received an invitation to bid on a special order for 23,500 units of one of its most popular products. Grant currently manufactures 47,000 units of this product in its Loveland, Ohio, plant. The plant is operating at 50% capacity. There will be no marketing costs on the special order. The sales manager of Grant wants to set the bid at $11 because she is sure that Grant will get the business at that price. Others on the executive committee of the firm object, saying that Grant would lose money on the special order at that price.

         

Units

 

47,000

 

70,500

         

Manufacturing costs:

       

Direct materials

$

117,500

$

176,250

Direct labor

 

164,500

 

246,750

Factory overhead

 

329,000

 

423,000

         

Total manufacturing costs

$

611,000

$

846,000

         

Unit cost

$

13

$

12

 

Calculate the relevant costs per unit and the bid price.

Relevant Cost per Unit ______________

Bid price should be any price above _____________

   
   
 

What would the total opportunity cost be if by accepting the special order the company lost sales of 6,500 units to its regular customers? Assume the above facts plus a normal selling price of $24 per unit.

Total opportunity cost ____________

Jun 19 2020 View more View Less

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