Highbank Company Is Operating at 80% of Its Manufacturing Capacity

question 63

Essay

Highbank Company is operating at 80% of its manufacturing capacity of 62,000 product units per year.A customer has offered to buy an additional 10,000 units at $17 each and sell them outside the country so as not to compete with Highbank.The following data are available:
$$\begin{array} { l c r } \text { Costs at 80\%/ capacity: } & { \text { Per } } & \text { Total } \\& \text { Unit } & \\\text { Direct materials } & \$ 4.00 & \$ 198,400 \\\text { Direct labor } & 2.00 & 99,200 \\ \text { Overhead (fixed and variable) } & \underline{ 5 . 0 0 } & \underline { 248,000 } \\\text { Totals } & \$ 1 1 . 0 0 & \$ 545,600\end{array}$$
In producing 10,000 additional units fixed overhead costs would remain at their current level but incremental variable overhead costs of $0.75 per unit would be incurred.What is the effect on total income if Highbank accepts this order?

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Definitions:

Wernicke's Area

A region of the brain important for language comprehension, located in the temporal lobe on the left side of the brain.

Understanding Speech

The process by which humans use the brain to interpret and understand the sounds and words spoken by others.

Stroke

A medical condition that occurs when the blood supply to part of the brain is interrupted or reduced, causing brain tissue to be damaged.

Apraxia

A motor disorder caused by damage to the brain in which a person has difficulty with the motor planning to perform tasks or movements when asked, in the absence of paralysis or other motor impairment.