The Cool Can Company manufactures drink koozies and has been approached by a new customer with an offer to purchase 15,000 units at a per-unit price of $7.00. The new customer is geographically separated from Cool Can’s other customers, and existing sales will not be affected. Cool Can normally produces 82,000 units but plans to produce and sell only 65,000 in the coming year. The normal sales price is $12 per unit. Unit cost information is as follows:

Assume that Cool Can plans to produce and sell 70,000 units in the coming year (rather than the originally anticipated 65,000 units).
1. Using Excel (or some other spreadsheet software tool), calculate the amount by which total operating income increases or decreases if the order is accepted.
2. Should Cool Can accept the special order (it must either be accepted in total or rejected) when sales at the regular price are expected to be 70,000 units.
3. Now assume that all direct variable costs are 20% higher and all indirect costs are 40% higher than originally stated in the set up box. These cost increases apply to both normal and special-order units. Finally, assume the new customer has offered to increase its price to $10.00 (from the $7.00 originally stated in the set up box). Using your spreadsheet, calculate the amount by which total operating income increases or decreases if the order is accepted.
4. Should Cool Can accept the special order as described in Requirement 3?
5. Explain the specific changes you made to your spreadsheet (from Requirement 1) to accommodate these cost and price increases. Briefly explain how taking the time to build your spreadsheet, including formulas, might be beneficial to your ability to conduct various types of data analytics. 

Transcribed Image Text:

Direct materials Direct labor Variable overhead Fixed overhead Total $3.10 1.50 1.00 1.80 $7.40