Flower Co. manufactures and sells medals for winners of athletic and other events. Its manufacturing plant has the capacity to produce 18,000 medals each month; current monthly production is 17,100 medals. The company normally charges $88 per medal. Cost data for the current level of production are shown below: Variable costs: Direct materials$495,900 Direct labor$324,900 Selling and administrative$30,780 Fixed costs: Manufacturing$345,420 Selling and administrative$164,160 The company has just received a special one-time order for 600 medals at $73 each. For this particular order, no variable selling and administrative costs would be incurred. This order would also have no effect on fixed costs.Required:Should the company accept this special order? Why? (CMA
adapted)
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 | $ | 495,900 | |
| Direct labor | 324,900 | ||
| Total | $ | 820,800 | |
| Current monthly production | 17,100 | ||
| Average direct materials and direct labor cost per unit | $ | 48 |
You might also like to view...
Mountain Rescue Incorporated sells emergency safety and rescue products to ski patrols and rescue workers at prices that are below those of its competitors, which offer a larger line of more expensive products and focus on broader markets. Mountain Rescue Incorporated is pursuing a ____ strategy.
A. cost-focus B. cost-leadership C. differentiation D. narrow E. focused-differentiation
A nominal scale is of very limited usefulness in analyzing data
Indicate whether the statement is true or false
A firm estimates that it will receive cash flows from a new product of $150,000 in Year 1, $220,000 in Year 2, and $150,000 in Year 3. If a discount rate of 7% is assumed, what is the NPV of this product’s cash flows?
a. $454,788 b. $556,400 c. $520,000 d. NPV cannot be determined from the information given
The following selected amounts are reported on the year-end unadjusted trial balance report for a company that uses the percent of sales method to determine its bad debts expense. Accounts receivable$425,000?DebitAllowance for Doubtful Accounts 1450?DebitNet Sales 2,300,000?Credit All sales are made on credit. Based on past experience, the company estimates 3.0% of credit sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?
A. Debit Bad Debts Expense $69,000; credit Allowance for Doubtful Accounts $69,000. B. Debit Bad Debts Expense $67,550; credit Allowance for Doubtful Accounts $67,550. C. Debit Bad Debts Expense $14,200; credit Allowance for Doubtful Accounts $14,200. D. Debit Bad Debts Expense $12,750; credit Allowance for Doubtful Accounts $12,750. E. Debit Bad Debts Expense $70,450; credit Allowance for Doubtful Accounts $70,450.