Question

Green Grow Inc. (GGI) manufactures lawn fertilizer. Because of the product’s very high quality, GGI often...

Green Grow Inc. (GGI) manufactures lawn fertilizer. Because of the product’s very high quality, GGI often receives special orders from agricultural research groups. For each type of fertilizer sold, each bag is carefully filled to have the precise mix of components advertised for that type of fertilizer. GGI’s operating capacity is 22,000 one-hundred-pound bags per month, and it currently is selling 20,000 bags manufactured in 20 batches of 1,000 bags each. The firm just received a request for a special order of 5,000 one-hundred-pound bags of fertilizer for $130,000 from APAC, a research organization. The production costs would be the same, but there would be no variable selling costs. Delivery and other packaging and distribution services would cause a one-time $2,500 cost for GGI. The special order would be processed in two batches of 2,500 bags each. (No incremental batch-level costs are anticipated. Most of the batch-level costs in this case are short-term fixed costs, such as salaries and depreciation.) The following information is provided about GGI’s current operations:

Sales and production cost data for 20,000 bags, per bag:
Sales price $ 40
Variable manufacturing costs 17
Variable selling costs 3
Fixed manufacturing costs 12
Fixed marketing costs 4

No marketing costs would be associated with the special order. Because the order would be used in research and consistency is critical, APAC requires that GGI fill the entire order of 5,000 bags.

Assume that the $12.00 fixed manufacturing overhead cost per unit consists of facility-level costs ($9.00/unit at the 20,000-unit output level), with the remainder being set-up-related (i.e., batch-level) costs. Assume that the set-up related costs increase in total with the number of batches produced and that the facility-level fixed costs do not vary in total, either with the number of units produced or the number of batches produced during a period.

Required:

1. What is the total fixed manufacturing overhead cost for the period? Break down (that is, decompose) this total cost into its component parts (i.e., batch-related overhead costs and facility-related fixed overhead costs).

Total batch-related OH costs:

Facility-related OH costs:

Total Fixed Man. OH Cost:

2. Calculate the relevant unit and total cost of the special order, including the new information about batch-related costs. Assume, as before, the one-time delivery cost of $2,500.

Total relevant cost for the special order:

Total relevant special cost for the items in the special order:

Homework Answers

Answer #1

Hey,

When attempting questions like this I always find it helpful to write down relevant info while reading the question at the begining of the page. This ensures that I do not miss out any points and at the same time gives me a precise idea of the points i need to refer to while actually solving the questions.

Please find enclosed attachment of the solution. I have written the actual solutions in blue ink and the explanations, notes and workings are in black.

Hope this helps. Thank you.

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
Green Grow Inc. (GGI) manufactures lawn fertilizer. Because of the product’s very high quality, GGI often...
Green Grow Inc. (GGI) manufactures lawn fertilizer. Because of the product’s very high quality, GGI often receives special orders from agricultural research groups. For each type of fertilizer sold, each bag is carefully filled to have the precise mix of components advertised for that type of fertilizer. GGI’s operating capacity is 35,000 one-hundred-pound bags per month, and it currently is selling 33,000 bags manufactured in 33 batches of 1,000 bags each. The firm just received a request for a special...
Green Grow Inc. (GGI) manufactures lawn fertilizer. Because of the product’s very high quality, GGI often...
Green Grow Inc. (GGI) manufactures lawn fertilizer. Because of the product’s very high quality, GGI often receives special orders from agricultural research groups. For each type of fertilizer sold, each bag is carefully filled to have the precise mix of components advertised for that type of fertilizer. GGI’s operating capacity is 22,000 one-hundred-pound bags per month, and it currently is selling 20,000 bags manufactured in 20 batches of 1,000 bags each. The firm just received a request for a special...
Baxter, Inc. manufactures high-end copiers used in businesses and sells their copiers directly to businesses through...
Baxter, Inc. manufactures high-end copiers used in businesses and sells their copiers directly to businesses through in-house sales representatives. The following are the budgeted costs for the year for the expected production of 3,000 copiers; actual costs to date have been tracking very close to budget: Unit-level costs: Material costs (3,000 units x $120) $360,000 Labor costs (3,000 units x $ 95) $285,000 Manufacturing overhead (3,000 units x $12.50) $ 37,500 Total Unit-Level Costs (3,000 units x $227.50) $682,500 Batch-level...
Stuart Quilting Company makes blankets that it markets through a variety of department stores. It makes...
Stuart Quilting Company makes blankets that it markets through a variety of department stores. It makes the blankets in batches of 6,000 units. Stuart made 36,000 blankets during the prior accounting period. The cost of producing the blankets is summarized here. Materials cost ($33 per unit × 36,000) $ 1,188,000 Labor cost ($29 per unit × 36,000) 1,044,000 Manufacturing supplies ($7 × 36,000) 252,000 Batch-level costs (6 batches at $6,000 per batch) 36,000 Product-level costs 280,000 Facility-level costs 350,000 Total...
Problem 13-24Effect of order quantity on special order decision Levy Quilting Company makes blankets that it...
Problem 13-24Effect of order quantity on special order decision Levy Quilting Company makes blankets that it markets through a variety of department stores. It makes the blankets in batches of 1,000 units. Levy made 20,000 blankets during the prior accounting period. The cost of producing the blankets is summarized as follows. Materials cost ($20 per unit × 20,000) $   400,000 Labor cost ($18 per unit × 20,000)     360,000 Manufacturing supplies ($3 × 20,000)       60,000 Batch-level costs (20 batches at $4,000 per...
Problem 13-24 Effect of order quantity on special order decision LO 13-2 Baird Quilting Company makes...
Problem 13-24 Effect of order quantity on special order decision LO 13-2 Baird Quilting Company makes blankets that it markets through a variety of department stores. It makes the blankets in batches of 1,000 units. Baird made 26,000 blankets during the prior accounting period. The cost of producing the blankets is summarized here. Materials Cost ($27 per unit x 26,000) $702,000 Labor Cost ($21 per unit x 26,000) 546,000 Manufacturing Supplies ($2 x 26,000) 52,000 Batch-level Costs (26 batches at...
Delta Company produces a single product. The cost of producing and selling a single unit of...
Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company’s normal activity level of 94,800 units per year is: Direct materials $ 1.90 Direct labor $ 2.00 Variable manufacturing overhead $ 0.60 Fixed manufacturing overhead $ 4.55 Variable selling and administrative expenses $ 1.90 Fixed selling and administrative expenses $ 1.00 The normal selling price is $26.00 per unit. The company’s capacity is 124,800 units per year. An order...
Krazy Inc manufactures industrial components. One of its products, Double Krazy, has the following production data:...
Krazy Inc manufactures industrial components. One of its products, Double Krazy, has the following production data: Per Unit Selling price $180 Direct materials $29 Direct labor $5 Variable manufacturing overhead $4 Fixed manufacturing overhead $21 Variable selling expense $2 Fixed selling and administrative expense $17 The above per unit data are based on annual production of 4,000 units of Double Krazy. 16. The company has received a special, one-time-only order for 500 units. There would be no variable selling expense...
Exercise 12-9 Special Order Decision [LO12-4] Delta Company produces a single product. The cost of producing...
Exercise 12-9 Special Order Decision [LO12-4] Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company’s normal activity level of 103,200 units per year is: Direct materials $ 2.30 Direct labor $ 3.00 Variable manufacturing overhead $ 0.70 Fixed manufacturing overhead $ 4.75 Variable selling and administrative expenses $ 2.00 Fixed selling and administrative expenses $ 2.00 The normal selling price is $22.00 per unit. The company’s capacity is...
GEM Limited has a single product Flicks. The company normally produces and sells 80,000 units of...
GEM Limited has a single product Flicks. The company normally produces and sells 80,000 units of Flicks each year at a price of $240 per unit. The company’s unit costs at this level of activity are as follow: Direct material $57.00 Direct labour 60.00 Variable manufacturing overhead 16.80 Fixed manufacturing overhead 30.00 Variable selling and administrative costs 10.20 Fixed selling and administrative costs 27.00 Total unit cost $201.00 GEM has sufficient capacity to produce 100 000 units of Flicks a...