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Wizard Corporation has analyzed their customer and order handling data

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Wizard Corporation has analyzed their customer and order handling
data for the past year and has determined the following costs:
Order processing cost per order $7
Additional costs if order must be expedited (rushed) $8.00
Customer technical support calls (per call) $12
Relationship management costs (per customer per year) $1200
In addition to these costs, product costs amount to 75% of Sales.
In the prior year, Wizard had the following experience with one of its customers, Chester Company:

Sales $15,000
Number of orders 160
Percent of orders marked rush 70%
Calls to technical support 80

Required:
Calculate the profitability of the Chester Company account

PowerDrive, Inc. produces a hard disk drive that sells for $175 per unit. The cost of producing 25,000 drives in the prior year was: Direct material$625,000Direct labor375,000Variable overhead125,000Fixed overhead1,500,000Total cost$2,625,000

At the start of the current year, the company received an order for 3,600 drives from a computer company in China. Management of PowerDrive has mixed feelings about the order. On the one hand they welcome the order because they currently have excess capacity. Also, this is the company’s first international order. On the other hand, the company in China is willing to pay only $140 per unit. What will be the effect on profit of accepting the order?

 
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