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Calculate the available production capacity

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Question - Outrack Company produces compasses for cross-country skiing. The production capacity is 45000 compasses, and the company is currently operating at 85 percent capacity. Variable manufacturing costs are $10 per unit. Fixed manufacturing costs are $425,000. The compasses are normally sold directly to Outdoor Tent City at $25 each. Ontrack has an offer from Neverlost Company (a foreign wholesaler) to purchase an additional 5000 compasses at $13 per unit.

Required -

A. Calculate the available production capacity.

b. Calculate the contribution margin per unit for both the current production of compasses and the special order compasses.

c. Should the special order be accepted? Show calculations.

d. What is the opportunity cost if Never lost required 10000 compasses?

e. Would you recommend the special order if Never lost Company required 10,000 compasses?

Reference no: EM132630879

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