1. Analyze the profitability of each of these two soecial orders.
2. Which special order should be accepted?
3. What other aspects need to be considered in the addition to profitability?
II. Cost Problem (35 points) Cosmos Computers, Inc. makes a variety of computers. One of these products is a PC model: Anova-XL. This model includes the ultimate in technology and is in strong demand. Expected demand for this year is 50,000 units. Full production capacity for Anova-XL is 55,000 units, but 50,000 units are considered normal capacity. The following unit price and breakdown is applicable in 2020: Price & Cost Breakdown per Order Actual 50,000 Quantity of Production Level $599.99 $95.00 $33.00 $30.00 $10.00 Sales Price Less manufacturing costs: Materials Direct Labor Overhead: Variable Fixed Total manufacturing costs Gross Margin Less selling and adm. expenses Selling: Variable Administrative, Fixed Resolution Options, variable Total selling and adm. expenses Net Profit before taxes Total Net Profit before taxes per order $168.00 $431.99 $5.00 $1.00 $58.00 $64.00 $367.99 $18,399,500 Note: Two types of VR Consoles Resolution are available: Ultra Resolution, $20 per unit: and Standard Resolution, $5 per unit. During December, the company received 2 special orders request from: Mercury Buy and Satur Inc. These orders are not part of the buducted 50,000 sules units of Anova-XL for 2020, but there is sufficient capacity for possibly one order to be accepted. Orders received and their terms are: Fixed $10.00 Total manufacturing costs $168.00 Gross Margin $431.99 Loss selling and adm. expenses Selling: Variable $5.00 Administrative, Fixed $1.00 Resolution Options, variable $58,00 Total selling and adm. expenses $64.00 Net Profit before taxes $367.99 Total Net Profit before taxes per order $18,399,500 Note: *Two types of VR Consoles Resolution are available: Ultra Resolution, $20 per unit; and Standard Resolution, 5 per unit. During December, the company received 2 special orders request from: Mercury Buy and Saturn Inc. These orders are not part of the budgeted 50,000 sales units of Anova-XL for 2020, but there is sufficient capacity for possibly one order to be accepted. Orders received and their terms are: Order#1 form Mercury Buy: 3,000 units at $570 per unit with: Ultra Resolution, $20 per unit. Order#2 form Saturn Inc.: 3,600 units at $550 per unit with Standard Resolution, $5 per unit. . Since these orders were made directly to Cosmos Computers, Inc., no variable selling costs will be incurred. Required: 1. Analyze the profitability of each of these two special orders. (30 points) 2. Which special order should be accepted? (2 points) 3. What other aspects need to be considered in addition to profitability? (3 points) II. Cost Problem (35 points) Cosmos Computers, Inc. makes a variety of computers. One of these products is a PC model: Anova-XL. This model includes the ultimate in technology and is in strong demand. Expected demand for this year is 50,000 units. Full production capacity for Anova-XL is 55,000 units, but 50,000 units are considered normal capacity. The following unit price and breakdown is applicable in 2020: Price & Cost Breakdown per Order Actual 50,000 Quantity of Production Level $599.99 $95.00 $33.00 $30.00 $10.00 Sales Price Less manufacturing costs: Materials Direct Labor Overhead: Variable Fixed Total manufacturing costs Gross Margin Less selling and adm. expenses Selling: Variable Administrative, Fixed Resolution Options, variable Total selling and adm. expenses Net Profit before taxes Total Net Profit before taxes per order $168.00 $431.99 $5.00 $1.00 $58.00 $64.00 $367.99 $18,399,500 Note: Two types of VR Consoles Resolution are available: Ultra Resolution, $20 per unit: and Standard Resolution, $5 per unit. During December, the company received 2 special orders request from: Mercury Buy and Satur Inc. These orders are not part of the buducted 50,000 sules units of Anova-XL for 2020, but there is sufficient capacity for possibly one order to be accepted. Orders received and their terms are: Fixed $10.00 Total manufacturing costs $168.00 Gross Margin $431.99 Loss selling and adm. expenses Selling: Variable $5.00 Administrative, Fixed $1.00 Resolution Options, variable $58,00 Total selling and adm. expenses $64.00 Net Profit before taxes $367.99 Total Net Profit before taxes per order $18,399,500 Note: *Two types of VR Consoles Resolution are available: Ultra Resolution, $20 per unit; and Standard Resolution, 5 per unit. During December, the company received 2 special orders request from: Mercury Buy and Saturn Inc. These orders are not part of the budgeted 50,000 sales units of Anova-XL for 2020, but there is sufficient capacity for possibly one order to be accepted. Orders received and their terms are: Order#1 form Mercury Buy: 3,000 units at $570 per unit with: Ultra Resolution, $20 per unit. Order#2 form Saturn Inc.: 3,600 units at $550 per unit with Standard Resolution, $5 per unit. . Since these orders were made directly to Cosmos Computers, Inc., no variable selling costs will be incurred. Required: 1. Analyze the profitability of each of these two special orders. (30 points) 2. Which special order should be accepted? (2 points) 3. What other aspects need to be considered in addition to profitability? (3 points)
