2. A Swiss distributor has proposed to place a special, one-time order for 6,000 units at aspecial price of $250 per unit. The distributor would pay all transportation costs. There would be additional fixed selling and administrative costs of $1,000. Assume overtime production is not possible. 3. The glasses also come with a choice of lens tint. Assume that eliminating that option would reduce unit variable costs by $5 and eliminate $50,000 in fixed factory overhead. The selling price would likely have to decrease to $290 per unit.

Case Study 2 Use the information provided, answer the following questions. Submit your work in a Word document. Show your detailed calculations and explanations. 35 10 Mascot manufactures high-end sunglasses that it sells in retail shops and online for $310, on average. Assume the following represent manufacturing and other costs. Variable Costs per Unit Fixed Costs per Month Direct materials............. $80 Factory overhead $450,000 Direct labor 50 Selling and administrative....... 375,000 Factory overhead ....... Total $825,000 Distribution Total... $175 The variable distribution costs are for transportation to retail partners. Assume the current monthly production and sales volume is 15,000 units. Monthly capacity is 20,000 units. Required Determine the effect of each of the following independent situations on monthly profits and discuss whether the company should consider the proposed changes in each situation. 1. A 10% decrease in the unit selling price should result in a 6,000-unit increase in monthly sales. However, because of capacity constraints, the last 1,000 units would be produced during overtime with the direct labor costs increasing by 50%. 2. A Swiss distributor has proposed to place a special, one-time order for 6,000 units at a special price of $250 per unit. The distributor would pay all transportation costs. There would be additional fixed selling and administrative costs of $1,000. Assume overtime production is not possible. 3. The glasses also come with a choice of lens tint. Assume that eliminating that option would reduce unit variable costs by $5 and eliminate $50,000 in fixed factory overhead. The selling price would likely have to decrease to $290 per unit. Case Study 2 Use the information provided, answer the following questions. Submit your work in a Word document. Show your detailed calculations and explanations. 35 10 Mascot manufactures high-end sunglasses that it sells in retail shops and online for $310, on average. Assume the following represent manufacturing and other costs. Variable Costs per Unit Fixed Costs per Month Direct materials............. $80 Factory overhead $450,000 Direct labor 50 Selling and administrative....... 375,000 Factory overhead ....... Total $825,000 Distribution Total... $175 The variable distribution costs are for transportation to retail partners. Assume the current monthly production and sales volume is 15,000 units. Monthly capacity is 20,000 units. Required Determine the effect of each of the following independent situations on monthly profits and discuss whether the company should consider the proposed changes in each situation. 1. A 10% decrease in the unit selling price should result in a 6,000-unit increase in monthly sales. However, because of capacity constraints, the last 1,000 units would be produced during overtime with the direct labor costs increasing by 50%. 2. A Swiss distributor has proposed to place a special, one-time order for 6,000 units at a special price of $250 per unit. The distributor would pay all transportation costs. There would be additional fixed selling and administrative costs of $1,000. Assume overtime production is not possible. 3. The glasses also come with a choice of lens tint. Assume that eliminating that option would reduce unit variable costs by $5 and eliminate $50,000 in fixed factory overhead. The selling price would likely have to decrease to $290 per unit