Jaycee Manufacturing, which produces electrical components, is contemplating submitting a bid for 30,000 units of item no. 54. The bid's cost will be follows:

Raw Materials…………………………………………………..$75,000

Direct Labor……………………………………………………..120000

Manufacturing Overhead………………………………………..150000

Additional set-up costs…………………………………………….3000

Special Device……………………………………………………..5000

Allocated Administrative Overhead……………………………..12000

Total Cost……………………………………………………..$365,000

The special device will be purchased for this job and once the job is completed, the device will be discarded.

Jaycee applies total manufacturing overhead of $5 to each unit (0.5 machine hours at $10 per hour). This figure is based, in part, on budgeted yearly fixed overhead of $1,440,000 and an

B. If Jaycee had excess capacity, what would be the lowest cost total that the company should use when figuring its bid for the order? (Calculate / explain the relevant costs. Hint – you need to break out the fixed component of OH to do so, and the problem contains sufficient information for you to do this.)

C. Can Jaycee produce this order in the required time frame of two months? Explain. ALSO - If it cannot, should it still accept the order if it is confident that it can slide regular order demand equivalent to 4,000 hours of machine time per month to subsequent periods without failure to meet delivery times or upsetting its normal customers? (Hint – figure out if they are short on machine time and by how much.)

D. Suppose that Jaycee is in marginal financial health. Explain the benefits and problems of approaching the bidding procedure with (1) a low bid or (2) a high bid. How much would you propose as a “low bid” and as a “high bid” given the relevant decision costs you calculated.