Cayman Products is currently manufacturing and selling 300,000 packages of under

Question

Cayman Products is currently manufacturing and selling 300,000 packages of underwater markers at a selling price of $4 per package. Costs related to the production and sale of the packages are as follows: Direct materials Direct labor Variable overhead Fixed overhead Fixed selling and administrative 1.28 per package 0.32 per package S0.72 per package 72,000 $200,000 Cayman's total capacity is 320,000 packages. A new customer would like to make a one time purchase of 50,000 packages for $3.45 per package. Additional fixed costs of $7,500 would be incurred if the special order is accepted. Should the special order be accepted? What is the difference in net income between accepting the special order and rejecting the special order?

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Amount Revenue from special order = 50,000*3.45          172,500.00 Less Costs: Direct materials= 50,000*1.28            64,000.00 Direct Labour= 50,000*.32            16,000.00 Variable overhead = 50,000*.72            36,000.00 Additional fixed costs               7,500.00 Loss of revenue from existing sales= 30,000(4 - 1.28 - .32 - .72)            50,400.00 Total costs          173,900.00 Income from special order            (1,400.00) No special order should not be accepted Difference in net income would be 1,400

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