Question

Adams Furniture receives a special order for 10 sofas for a special price of $5,600. The...

Adams Furniture receives a special order for 10 sofas for a special price of $5,600. The direct materials and direct labor for each sofa are $120. In addition, supervision and other fixed overhead costs average $140 per sofa.

a1. What is the impact on operating income from accepting the special order?

a2. Based solely on a short-term financial analysis, should Adams accept the special order?

b1. If Adams is currently operating at full capacity, what would be the opportunity cost per unit for lost sales to regular customers if the special sales order is accepted and the selling price per unit on regular sales equals $800?

b2. Based solely on a short-term financial analysis, should Adams accept the special order if it is currently operating at full capacity?

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Question 2 Jackson Inc. disposes of other companies’ toxic waste. Currently, Jackson loads the waste by...
Question 2 Jackson Inc. disposes of other companies’ toxic waste. Currently, Jackson loads the waste by hand into a truck, which requires labor of $15 per load. Jackson is considering a machine that would reduce the amount of time needed to load the waste. The machine would cost $154,500 but would reduce labor cost to $4 per load. Assume that Jackson averages 10,300 loads per year. How many years would it take for Jackson to recover the cost of the...
Capitol has received a special order for 2,000 units of its product at a special price...
Capitol has received a special order for 2,000 units of its product at a special price of $150. The product normally sells for $200 and has the following manufacturing costs:    Per unit Direct materials $ 50 Direct labor 30 Variable manufacturing overhead 20 Fixed manufacturing overhead 40 Unit cost $ 140 Assume that Capitol has sufficient capacity to fill the order without harming normal production and sales and all fixed overhead is unavoidable.   a. If Capitol accepts the order, what...
Marcy has received a special order for 2,700 units of its product at a special price...
Marcy has received a special order for 2,700 units of its product at a special price of $96. The product normally sells for $110 and has the following manufacturing costs: Per unit Direct materials $ 32 Direct labor 20 Variable manufacturing overhead 13 Fixed manufacturing overhead 7 Unit cost $ 72 Assume that Marcy has sufficient capacity to fill the order without harming normal production and sales and all fixed overhead is unavoidable. a. If Marcy accepts the order, what...
Cranberry has received a special order for 110 units of its product at a special price...
Cranberry has received a special order for 110 units of its product at a special price of $2,200. The product normally sells for $2,700 and has the following manufacturing costs: Per unit Direct materials $ 740 Direct labor 440 Variable manufacturing overhead 540 Fixed manufacturing overhead 640 Unit cost $ 2,360 Assume that Cranberry has sufficient capacity to fill the order without harming normal production and sales. If Cranberry accepts the order, what effect will the order have on the...
Vincennes Co. receives an order for one of its products. The order demands a 10% discount...
Vincennes Co. receives an order for one of its products. The order demands a 10% discount from the standard price, but would be for a sizable volume: 10,000 units. Vincennes typically sells the product for $20 per unit and incurs production costs of $400,000 fixed and $700,000 variable for the 80,000 units it produces in an average month. In addition, Vincennes incurs $1,200,000 in fixed marketing and administration costs. Vincennes’ factory is currently operating at full capacity. Should Vincennes accept...
Digital Devices, Inc. has received a special order to manufacture 10,000 CD ROM drives for an...
Digital Devices, Inc. has received a special order to manufacture 10,000 CD ROM drives for an Italian computer manufacturer. Digital determines that the order will not affect its current domestic sales of CD ROM drives and because of the special nature of the order no sales commission would be paid. However, to process the order for export, an additional handling cost of $10 per unit is estimated. The order indicates that the price of the drives cannot exceed $200. The...
Belle`s Accessories Limited makes fashion purses. They have received a request for a special order of...
Belle`s Accessories Limited makes fashion purses. They have received a request for a special order of 100 purses. The normal selling price and unit costs per purse are as follows:             Sales price                               $100             Direct materials                           30             Direct labour                               20             Manufacturing overhead             10 The manufacturing overhead is 80% fixed and 20% variable. The customer would like a special design imprinted on the purse that will increase direct labour by $1 per purse. The...
Grant Industries, a manufacturer of electronic parts, has recently received an invitation to bid on a...
Grant Industries, a manufacturer of electronic parts, has recently received an invitation to bid on a special order for 17,500 units of one of its most popular products. Grant currently manufactures 35,000 units of this product in its Loveland, Ohio, plant. The plant is operating at 50% capacity. There will be no marketing costs on the special order. The sales manager of Grant wants to set the bid at $13 because she is sure that Grant will get the business...
Special Order Lorraine manufactures a single product with the following full unit costs for 3,000 units:...
Special Order Lorraine manufactures a single product with the following full unit costs for 3,000 units: Direct materials $80 Direct labor 40 Manufacturing overhead (40% variable) 120 Selling expenses 40 Administrative expenses (10% variable)     20 Total per unit $300 A company recently approached Lorraine with a special order to purchase 500 units for $300. Lorraine currently sells the models to dealers for $550. Capacity is sufficient to produce the extra 1,000 units. No selling expenses would be incurred on...
Special Order Total cost data follow for Greenfield Manufacturing Company, which has a normal capacity per...
Special Order Total cost data follow for Greenfield Manufacturing Company, which has a normal capacity per period of 20,000 units of product that sell for $54 each. For the foreseeable future, regular sales volume should continue to equal normal capacity. Direct material $268,800 Direct labor 202,000 Variable manufacturing overhead 154,000 Fixed manufacturing overhead (Note 1) 118,800 Selling expense (Note 2) 129,600 Administrative expense (fixed) 50,000 $923,200 Notes: 1. Beyond normal capacity, fixed overhead costs increase $4,500 for each 1,000 units...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT