Q2. International Brands Ltd. Is operating at 60% capacity and producing...

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TENDER FOR 900 UNITS MEANS THAT 20% ADDITIONAL CAPACITY
SO INTERNATIONAL BRANDS LTD WILL HAVE TO WORK AT 80% CAPACITY
ASSUMPTION: AT ADDITIONAL CAPACITY NO EXTRA FIXED OVERHEAD IS INCURRED


	60% CAPACITY	80% CAPACITY	ADDITIONAL UNITS =80%-60%
UNITS	2700	3600	900
DIRECT MATERIAL	$ 54,000	$ 72,000	$ 18,000
DIRECT LABOR	$ 8,100	$ 10,800	$ 2,700
VARIABLE OVERHEAD	$ 9,900	$ 13,500	$ 3,600
FIXED OVERHEAD	$ 18,000	$ 18,000	$ -
	$ 90,000	$ 114,300	$ 24,300

SO COST FOR ADDITIONAL 900 UNITS IS	$ 24,300
ADD 10% PROFIT MARGIN	$ 2,430
BID PRICE FOR TENDER OF 900 UNITS IS	$ 26,730	$ 29.70

EFFECT ON MONTHLY PROFIT
	2700 UNITS	900 UNITS	TOTAL
UNIT SALE PRICE	$ 72	$ 29.70
TOTAL SALE	$ 194,400	$ 26,730	$ 221,130
TOTAL COST	$ 90,000	$ 24,300	$ 114,300
MONTHLY PROFIT	$ 104,400	$ 2,430	$ 106,830


MONTHLY PROFIT INCREASES BY $2430 PER MONTH

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