LO 7-2, 7-3 PB7-1 Analyzing Special-Order Decision Greenview Corp. makes several

Question

LO 7-2, 7-3 PB7-1 Analyzing Special-Order Decision Greenview Corp. makes several varieties of wooden furniture. It has been approached about producing a special order for Wilderness rocking chairs. A local senior citizens group would use the special-order chairs in a newly remodeled activity center. The senior citizens group has offered to buy 80 of the Wilderness chairs at a price of $65 each. Greenview currently has the excess capacity necessary to accept the offer. A summary of the information related to production of Greenview's Wilderness model follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead $30 12 $75 $99 Total cost Regular sales price Required: 1. Compute the incremental profit (or loss) from accepting the special order. 2. Should Greenview accept the special order? 3. Suppose that the special order had been to purchase 100 rocking chairs for $60 each. Recompute the incremental profit (or loss) from accepting the special order. 4. Assume Greenview is operating at full capacity. Calculate the special-order price per unit at which Greenview would be indifferent between accepting or rejecting the special order.

Explanation / Answer

1 Per unit 80 units Incremental revenue 65 5200 Incremental costs: Direct materials 30 2400 Direct labor 22 1760 Variable manufacturing overhead 12 960 Incremental profit(loss) 80 2 Yes, accept the special order 3 Per unit 100 units Incremental revenue 60 6000 Incremental costs: Direct materials 30 3000 Direct labor 22 2200 Variable manufacturing overhead 12 1200 Incremental profit(loss) -400 4 Special order price = $99

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.