Requirement 5. Nike has just asked Linger Industries to supply 400,000 cans of b

Question

Requirement 5. Nike has just asked Linger Industries to supply 400,000 cans of balls at a special order price of $1.20 per can. Nike wants Linger Industries to package the balls under the Nike label (Linger will imprint the Nike logo on each ball and can). As a result, Linger Industries will have to spend $10,000 to change the packaging machinery. Assuming the original volume and costs, should Linger Industries accept this special order? (Assume that Linger will incur variable selling costs as well as variable manufacturing costs related to this order.) Calculate the operating income provided by the special order. Less Contribution margin from special order Less: Operating income provided by special order Should Linger Industries accept this special order? Linger Industries should | | the special order because it will operating income. Choose from any list or enter any number in the input fields and then continue to the next question.

Explanation / Answer

Requirement 1 :

Requirement 2 :

No, given the current total costs, Linger Industries would not reach stockholder profit goals.

Requirement 3 :

Requirement 4 :

Requirement 5 :

Linger Industries should accept the special order because it will increase operating income.

Total Variable Cost ( 2,000,000 x $ 1) $ 2,000,000 Plus: Total Fixed Cost 700,000 Current Total Costs 2,700,000 Number of cans 2,000,000 Total cost per can $ 1.35

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