Answered step by step
Verified Expert Solution
Question
1 Approved Answer
ABC Corporation produces toys for kids that it sells for $37 each. At capacity, the company can produce 54,000 toys a year. The costs of
ABC Corporation produces toys for kids that it sells for $37 each. At capacity, the company can produce 54,000 toys a year. The costs of producing and selling 54,000 toys are as follows: Total Cost Cost per Toy $14 4 Direct Materials Variable Direct Manufacturing Labor Variable Manufacturing Overhead Fixed Manufacturing Overhead Variable Selling Expenses Fixed Selling Expenses Total Costs WNIONS $756,000 216,000 108,000 270,000 108,000 162,000 $1,620,000 2 3 $30 Requirements: 1. Suppose ABC Corporation is currently producing and selling 44,000 toys. At this level of production and sales, its fixed costs are the same as given in the preceding table. Fun-Times Corporation wants to place a one-time special order for 10,000 toys at $21 each. ABC will incur no variable selling costs for this special order. Should ABC accept this one-time special order? Show your calculations. 2. Now suppose ABC is currently producing and selling 54,000 toys. If ABC accepts Fun-times's offer it will have to sell 10,000 fewer bats to its regular customers. a. On financial considerations alone, should ABC accept this one-time special order? Show your calculations. b. On financial considerations alone, at what price would ABC be indifferent between accepting the special order and continuing to sell to its regular customers at $37 per toy? c. What other factors should consider in deciding whether to accept the one- time special order
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started