Lean Inc Budgeted to Produce 10000 Widgets During 2016 Instructions
Answer Each of the Following Independent Questions:
1

Lean Inc. budgeted to produce 10000 widgets during 2016. Lean has capacity to produce 12000 units. Fixed factory overhead is allocated to production. The following estimated costs were provided: $\begin{array}{lr}\text { Direct material }\left(\$ 7 / \text { unit }^{2}\right. & \$ 70,000 \\\text { Direct labor }(\$ 15 / \mathrm{hr} \times 2 \text { hrs./unit) } & 300,000 \\\text { Variable manufacturing overhead }(\$ 3 / \text { unit) } & 30,000 \\\text { Fixed factory overhead costs }(\$ 5 / \text { unit) } & 50,000 \\\text { Total } & \$ 450,000\\\text { Cost per unit }=\$ 45\end{array}$
Instructions
Answer each of the following independent questions:
1. Lean received an order for 1000 units from a new customer in a country in which Lean has never done business. This customer has offered $44 per widget. Should Lean accept the order?
2. Lean received an offer from another company to manufacture the same quality widgets for $39. Should Lean let someone else manufacture all 10000 widgets and focus only on distribution?