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THREE Prestea Ghana Limited (PGL) produces a single product, Ore. Operating at full capacity, the company can produce 250,000 units per year. Costs associated with this level of production and sales are given below: Unit Total GH GH Direct materials 30 7,500,000 Direct labour 40 10,000,000 Variable overhead 5 1,250,000 Fixed overhead 15 3,750,000 Variable selling expenses 10 2,500,000 Fixed selling expenses 20 5,000,000 REQUIRED: (A)A government agency would like to make a one-time-only purchase of 50,000 units. The agency would pay a fixed fee GH2.00 per unit, and in addition it would reimburse PGL for all costs of production associated with the units. There would be no variable selling expenses associated with this order. You may assume that due to a recession, sales of the products have slumped down to only 200,000 units per year. If PGL accepts the agencys business, how much will profits be increased or decreased from what they would be if only 200,000 units were produced and sold? (B)Assume the same situation as that described in (a) above, except that the company is currently selling 250,000 units each year through regular channels. Thus, accepting the agencys business would require giving up regular sales of 50,000 units. If the agencys business is accepted, by how much will profits be increased or decreased from what they would be if the 50,000 units were so

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