Anglen Co. manufactures and sells trophies for winners of athletic and other events. Its manufacturing plant has the capacity to produce 18,000 trophies each month; current monthly production is 14,400 trophies. The company normally charges $103 per trophy. Cost data for the current level of production are shown below:Variable costs:?Direct materials$460,800Direct labor$316,800Selling and administrative$15,840Fixed costs:?Manufacturing$404,640Selling and administrative$74,880The company has just received a special one-time order for 900 trophies at $48 each. For this particular order, no variable selling and administrative costs would be incurred. This order would also have no effect on fixed costs. Assume that direct labor is a variable cost.Required:Should the company accept this
special order? Why?
What will be an ideal response?
Only the direct materials and direct labor costs are relevant in this decision. To make the decision, we must compute the average direct materials and direct labor cost per unit.
| Direct materials | $ | 460,800 |
| Direct labor | 316,800 | |
| Total | $ | 777,600 |
| Current monthly production | 14,400 | |
| Average direct materials and direct labor cost per unit | $ | 54 |
You might also like to view...
The bus topology connects the nodes in parallel
Indicate whether the statement is true or false
A statement that some difference or effect is expected is called a(n) ________
A) null hypothesis B) alternative hypothesis C) random hypothesis D) standardized hypothesis E) incidence of difference
Which of the following represents a permanent difference?
a. Point-of-sale revenue recognition for financial reporting purposes, installment method for tax purposes b. Goodwill amortization deducted on the tax return but not amortized for financial reporting purposes c. Straight-line depreciation for financial reporting purposes, accelerated depreciation for tax purposes d. Carryback, carryforward option for taxes, no such option for financial reporting purposes
Sensitivity analysis is
a. an appropriate response to uncertainty in cash flow projections. b. useful in measuring the variance of the Fisher rate. c. typically conducted in the post investment audit. d. useful to compare projects requiring vastly different levels of initial investment.