Question
1. OBrien Enterprises produces giant stuffed bears. Each bear consists of $12 of variable costs and $9 of fixed costs and sells for $45. A
1. OBrien Enterprises produces giant stuffed bears. Each bear consists of $12 of variable costs and $9 of fixed costs and sells for $45. A wholesaler offers to buy 8,000 bears for $14 each, of which OBrien Enterprises has the capacity to produce. OBrien will incur extra shipping costs of $1 per bear. Should OBrien Enterprises accept the special order? Please show your calculations to support your decision. 2. OBrien Corporation currently manufactures 3,000 staplers annually for use in its main product. The costs per stapler are as follows: Direct materials $ 3.00 Direct labor 7.00 Variable overhead 4.00 Fixed overhead 7.00 Total $21.00 Gallup Company has contacted OBrien Corporation with an offer to sell them 3,000 staplers for $18.00 each. $5 of the fixed overhead per unit is unavoidable. Should OBrien Corporation continue to make the staplers or accept the offer to buy? Please show your calculations to support your decision. 3. OBrien Farms, Inc. produces a crop of chickens at a total cost of $66,000. The production generates 60,000 chickens which can be sold for $1 each to a slaughtering company or the chickens can be slaughtered in house and then sold for $2.75 each. It costs $65,000 more to turn the annual chicken crop into chicken meat. If OBrien Farms slaughters the chickens, determine how much incremental profit or loss it would report. What should OBrien Farms do?
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