Reference no: EM132566865

Labour Costs

The urgent-order will need 300 hours of skilled labor to complete the order. However, these skilled labor hours are currently working at full capacity in producing and selling a current product that has a contribution to sales ratio (C/S ratio) of 40%, a selling price is $500 per unit, labor rate of $20 per hour and the labor cost is $100.00 per unit. The company has an option to either hire the 300 hour externally at a higher rate of $30.00 per hour or to take the 300 hours from current product.

Machinery costs

A special moulding machine costing $200,000 will need to be hired for this urgent-order at a flat hiring rate of $500 per week. The special order will take 6 weeks to complete. Power and maintenance expenses will increase by $150 per week.

Question 1: Prepare calculations and provide detailed explanation for all relevant costs and irrelevant costs related to the urgent-order of Coved Ltd.