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:

Looking-glass Selves

A social psychological concept suggesting that a person's self grows out of society's interpersonal interactions and the perceptions of others.

Looking-glass Model

A concept in sociology that suggests individuals develop their sense of self based on how they believe others perceive them.

Self-concept

An individual's perception and evaluation of themselves, including their beliefs about their own attributes and who and what they are.

Central Self-goals

Objectives or aspirations that are at the core of an individual's identity and purpose, guiding their behavior and influencing their decision-making.