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Mohave Corp. makes several varieties of beach umbrellas and accessories. It has been approached by a company called Lost Mine Industries about producing a special order for a custom umbrella called the Ultimate Shade (US). The special-order umbrellas with the Lost Mine Company logo would be distributed to participants at an upcoming convention sponsored by Lost Mine.
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Lost Mine has offered to buy 3,300 of the US umbrellas at a price of $34 each. Mohave currently has the excess capacity necessary to accept the offer. The following information is related to the production of the US umbrella:
|
| |
| Direct materials |
$ |
14.00 |
| Direct labor |
|
8.00 |
| Variable manufacturing overhead |
|
10.00 |
| Fixed manufacturing overhead |
|
2.50 |
| |
|
|
| Total cost |
$ |
34.50 |
| |
|
|
| Regular sales price |
$ |
42.00 |
|
Compute the incremental profit (or loss) from accepting the special order.
1. Profit (or loss) _____________ by ______________
2.Should Mohave accept the special order?
Yes? _____
No? ______
3.Suppose that the special order had been to purchase 3,800 umbrellas for $31.00 each. Recompute the incremental profit (or loss) from accepting the special order under this scenario.
Profit (or loss ___________by_______________
4. Assume that Mohave is operating at full capacity. Calculate the special-order price per unit at which Mohave would be indifferent between accepting or rejecting the special order.
Special Order Price _______________ per Unit
|
Mohave Corp. makes several varieties of beach umbrellas and accessories. It has been approached by a company called Lost Mine Industries about producing a special order for a custom umbrella called the Ultimate Shade (US). The special-order umbrellas with the Lost Mine Company logo would be distributed to participants at an upcoming convention sponsored by Lost Mine.
|
|
Lost Mine has offered to buy 3,300 of the US umbrellas at a price of $34 each. Mohave currently has the excess capacity necessary to accept the offer. The following information is related to the production of the US umbrella:
|
|
| Direct materials |
$ |
14.00 |
| Direct labor |
|
8.00 |
| Variable manufacturing overhead |
|
10.00 |
| Fixed manufacturing overhead |
|
2.50 |
|
|
|
| Total cost |
$ |
34.50 |
|
|
|
| Regular sales price |
$ |
42.00 |
|
Compute the incremental profit (or loss) from accepting the special order.
1. Profit (or loss) _____________ by ______________
2.Should Mohave accept the special order?
Yes? _____
No? ______
3.Suppose that the special order had been to purchase 3,800 umbrellas for $31.00 each. Recompute the incremental profit (or loss) from accepting the special order under this scenario.
Profit (or loss ___________by_______________
4. Assume that Mohave is operating at full capacity. Calculate the special-order price per unit at which Mohave would be indifferent between accepting or rejecting the special order.
Special Order Price _______________ per Unit