Woodchuck Corp. makes several varieties of wooden furniture. It has been approached about producing a special order for rocking chairs. A local senior citizens group would use the special- order chairs in a newly remodeled activity center.

The senior citizens have offered to buy 80 of the Rock-On chairs at a price of \($70\) each. Woodchuck currently has the excess capacity necessary to accept the offer. A summary of the information related to production of Woodchuck’s Rock-On model follows:

Required:

1. What impact would this special order have on Woodchuck’s total profit?

2. Should Woodchuck accept the special order?

3. Suppose that the special offer had been to purchase 100 rocking chairs for \($65\) each. What effect would that offer have on Woodchuck’s total profit?

4. Assume Woodchuck is operating at full capacity. Determine the special-order price per unit at which Woodchuck would be indifferent to accepting the special order.

Transcribed Image Text:

Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost Regular sales price $30 20 12 11 $73 $99