Bluegrass has received a special order for 6,000 units of its product at a speci

Question

Bluegrass has received a special order for 6,000 units of its product at a special price of $45. The product normally sells for $60 and has the following manufacturing costs: Assume the Bluegrass has sufficient capacity to fill the order. If Blue grass accepts the order, what effect will the order have on the company's short-term profit? Ironwood has received a special order for 2,000 units of its product at a special price. The product normally sells for $400 and has the following manufacturing costs: Assume that Iron wood has sufficient capacity to fill the order. What special order price should Ironwood charge to make a $20,000 incremental profit?

Explanation / Answer

87. Special Order Revenue = 6,000 X $45 = $270,000 Costs thereagainst = 6,000 X $45 = $270,000 Profit earned from completing the special order = NIL (Zero) Hence, Option D is the correct option. 88. Assume the price per unit as X$ Sale Value from the special order = 2,000 * X = 2,000 X Manufacturing Costs for 2,000 units = 2000 X 360 720000 $ Incremental Profit required = 20,000$ Hence, 2,000 X - 720,000 = 20,000 Therefore, X = 740,000/2,000 = $ 370 per unit The option closest to this is $360, hence B is the correct option

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