This paper concentrates on the primary theme of Blastoff Inc. manufactures sophisticated products used in the agriculture industry. in which you have to explain and evaluate its intricate aspects in detail. In addition to this, this paper has been reviewed and purchased by most of the students hence; it has been rated 4.8 points on the scale of 5 points. Besides, the price of this paper starts from £ 79. For more details and full access to the paper, please refer to the site.

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Question 4
Blastoff Inc. manufactures sophisticated products used in the agriculture industry. The company has been approached by a customer who wants to buy 400 identical products at $200 per unit over the next 12 months.
The data in respect of the production of each individual unit is as follows:
1. Direct material requirements
3kg -direct material X1 - see note a)
2kg- direct material X2 -see note b)
10 litres A687 -see note c)
Notes:
a) Direct material X1 is used continually by Blastoff for manufacturing of a number of different products. There are currently 1,00kg in stock at a carrying value of $4.70 per kg. The replacement value of this direct material is $5.00 per kg.
b) There are 1,200 kg of X2 in stock. The original cost of this direct material was $4.30 per kg. As this direct material has not been used in the past two years, it has been written down to $1.50 per kg, the currents crap value. The only other alternative use for X2 is to use it as a substitute for direct material P4 (currently used to manufacture other products). This, however, requires X2 to be further processed at a cost of $1.60 per kg. The current cost of direct material P4 is $3.60 per kg.
c) Direct material A687 currently costs $5 per litre

2. Labour Requirements
Each unit requires 2 hours of skilled labour and 2.5 hours of semi-skilled labour. There is a permanently appointed skilled labourer, who is paid $50 per hour, who has enough spare time available to supply the skilled labour requirements for the contract. An additional semi-skilled labourer will have to be hired to carry out the contract. Skilled labourers can be hired at $45 per hour and semi-skilled labour at $25 per hour.

3. Overheads
Blastoff recovers overheads at a machine hour rate of $25 per machine hour. $7 of this is for variable costs that vary directly with the production of the components and $18 is for fixed overheads. If the contract with the client is accepted, the fixed overhead costs will increase by $3,200 for the period of the contract. There is currently idle capacity available and the production of each unit will require 4 machine hours.

Required: Prepare a calculation that shows whether or not Blastoff should accept the new order.