Question 4: Chavez Co. Produces and Sells Duffel Bags That Are Priced at $60 Each. Chavez Has Received a Request for a Special Order for 500 Duffel Bags at a Price of $48 Each. the Current Unit Cost to Produce a Bag Is $

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Question 4: Chavez Co. produces and sells duffel bags that are priced at $60 each. Chavez has received a request for a special order for 500 duffel bags at a price of $48 each. The current unit cost to produce a bag is $32 (direct material, $20; direct labor, $8; and unit-related overhead, $4). Chavez Co. has the capacity to produce the special order; however, one additional production run will be required costing $2,000. Should the order be accepted? Why or why not? (3 points) Question 5: Whitney, Inc. manufactures a unique hand lotion formulated for extremely dry weather. It also makes the containers the lotion is sold in. Production costs for the 15,000 containers needed annually are as follow: Direct materials $35,000 Direct labor 15,000 Unit-related overhead 5,000 Product-sustaining overhead 6,000 Allocated facility-sustaining overhead 14,000 A supplier has offered to provide all 15,000 containers at a price of $4.50 per container. If Whitney, Inc. accepts the offer; it will rent the released space for an annual rental fee of $12,000. Should Whitney, Inc. make or buy the containers? (2 points) Question 6:In addition to selling custom-designed jewelry, Darrah’s Jewelry Store also offers repair and appraisal services. After reading the following profit report, decide whether Darrah’s should drop the appraisal service. (2 points) Jewelry Sales Repair Service Appraisals Revenues $90,000 $45,000 $5,000 Cost of sales (service) 45,000 25,000 1,000 Product margin $45,000 $20,000 $4,000 Facility-sustaining costs 15,000 15,000 15,000 Profit $30,000 $ 5,000

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