Camino Company manufactures designer to-go coffee oups. Each line of coffee cups

Question

Camino Company manufactures designer to-go coffee oups. Each line of coffee cups is endorsed by a high -profile celerity and designed with special elements selected by the calebrity. During the most acent year, Camino Company had the following operating results while operating at 85 percene (119,000 units) of ts capacity Cost of goods sold Gross profit Operating expenses Net operating income $1,904,000 28.875 75,125 9.500 Camino's cost of goods sold and operating expenses are 80 percent variable and 20 percent fxed. Camino has biggest star and produce 18,000 cups for $ fee to the wrestling star, but no other increases in fxed operating expenses necelived an offer from a professional wreling a cups would be soild at wrestling matches throughout the United States Acceptance 10 each total $180 ,000). These association to design a coffee cup ondorsed by ts of the order would require $54,000 endorsement Required analysis of the special order in the table provided below. (Enter per unit answers to 2 decimal places. S 10.00180.000 Less: Incremental Costs Variable COGS Variable Operating Expenses Endorsement Fee Incremental Proft 54000 2. Should Camino accept this special order? Yes No 3. Camino were operating at full capacity, what price would Camino require for the special oder?

Explanation / Answer

Answer =1 Total Cost of Goods sold = $7,28,875 Less: Fixed Cost 20% $1,45,775 Variable Cost $5,83,100 "/" By Number of units = $1,19,000 Units Variable Cost Per unit $4.90 Per Units CALCULATION OF INCREAMENTAL INCOME Particulars Per Cupt Total Increaemental Revenue $10.0 $1,80,000.0 Less: Increamental Cost Variable Cost of Goods Sold $4.90 $88,200.0 Variable Operating Expenses $0.4 $7,200.0 Endorsement Fees $54,000.0 Increamental Profit $30,600.0 Answer =2 Camino will accept the Special order because there is increamental revenue of $ 30,600 Answer =3 CALCULATION OF TOTAL COST FOR THE SPRECIAL ORDERS Particulars Per Cupt Total Increamental Cost For Special orders Variable Cost of Goods Sold $4.90 $88,200.0 Variable Operating Expenses $0.4 $7,200.0 Endorsement Fees $54,000.0 Opportunity Cost (Working as below) $6.0 $1,08,000.0 Total Cost $2,57,400.0 Total Units 18000 units Per unit Cost = $ 14.30 Per cup Working Note : Current Sales price = 1,904,000/119000= $16 Per unit Offer Price $10 Per unit Difference $6 Per unit

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