Describe the qualitative factors that Lance should consider before accepting the special order described in Exercise 13-5.
Question:
Describe the qualitative factors that Lance should consider before accepting the special order described in Exercise 13-5.
Data From Exercise 13-5:-
Lance Company manufactures a personal computer designed for use in schools and markets it under its own label. Lance has the capacity to produce 20,000 units a year but is currently producing and selling only 15,000 units a year. The computer’s normal selling price is \($1,600\) per unit with no volume discounts. The unit-level costs of the computer’s production are \($600\) for direct materials, \($200\) for direct labor, and \($250\) for indirect unit-level manufacturing costs. The total product- and facility-level costs incurred by Lance during the year are expected to be \($2,000,000\) and \($800,000\) , respectively. Assume that Lance receives a special order to produce and sell 4,000 computers at \($1,200\) each.
Required:
Should Lance accept or reject the special order? Support your answer with appropriate computations.
Step by Step Answer:
Survey Of Accounting
ISBN: 9780073526775
1st Edition
Authors: Thomas Edmonds, Philip Olds, Frances McNair, Bor-Yi Tsay