Grant Industries, a manufacturer of electronic parts, has recently received an invitation to bid on a...

50.1K

Verified Solution

Question

Accounting

Grant Industries, a manufacturer of electronic parts, hasrecently received an invitation to bid on a special order for25,000 units of one of its most popular products. Grant currentlymanufactures 50,000 units of this product in its Loveland, Ohio,plant. The plant is operating at 50% capacity. There will be nomarketing costs on the special order. The sales manager of Grantwants to set the bid at $14 because she is sure that Grant will getthe business at that price. Others on the executive committee ofthe firm object, saying that Grant would lose money on the specialorder at that price.
Units 50,000 75,000
Manufacturing costs:
Direct materials $ 200,000 $ 300,000
Direct labor 250,000 375,000
Factory overhead 350,000 450,000
Total manufacturing costs $ 800,000 $ 1,125,000
Unit cost $ 16 $ 15
Required
2. What would be the Relevant cost per unit if the order isaccepted at the price recommended by the sales manager? What do youthink the minimum (short-term) bid price should be?
4. What would the total opportunity cost be if by accepting thespecial order the company lost sales of 6,800 units to its regularcustomers? Assume the preceding facts plus a normal selling priceof $30 per unit.

Answer & Explanation Solved by verified expert

3.8 Ratings (422 Votes)

2 Relevant costing helps us to compute the incremental costing for decision making To compute relevant cost mentioned in the question we need to calculate the incremental costs by comparing the costs at both 50000 capacity and 75000 capacity 50000 capacity a 75000 capacity b See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member


Units		50,000		75,000
Manufacturing costs:
Direct materials	$	200,000	$	300,000
Direct labor		250,000		375,000
Factory overhead		350,000		450,000
Total manufacturing costs	$	800,000	$	1,125,000
Unit cost	$	16	$	15