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all that is correct is the 494,000 in R1 and decline by in R3 Green Grow Incorporated (GGI) manufactures lawn fertilizer. Because of the product's
all that is correct is the 494,000 in R1 and decline by in R3
Green Grow Incorporated (GGI) manufactures lawn fertilizer. Because of the product's very high quality, GGI often receives special orders from agricultural research groups. For each type of fertilizer sold, each bag is carefully filled to have the precise mix of components advertised for that type of fertilizer. GGI's operating capacity is 40,000 one-hundred-pound bags per month, and it currently is selling 38,000 bags manufactured in 38 batches of 1,000 bags each. The firm just received a request for a special order of 8,600 one-hundred-pound bags of fertilizer for $250,000 from APAC, a research organization. The production costs would be the same, but there would be no variable selling costs. Delivery and other packaging and distribution services would cause a one-time $5,300 cost for GGI. The special order would be processed in two batches of 4,300 bags each. (No incremental batch-level costs are anticipated. Most of the batch-level costs in this case are short-term fixed costs, such as salaries and depreciation.) The following information is provided about GGI's current operations: Sales and production cost data for 38,000 bags, per bag: Sales price Variable manufacturing costs Variable selling costs Fixed manufacturing costs Fixed marketing costs No marketing costs would be associated with the special order. Because the order would be used in research and consistency is critical, APAC requires that GGI fill the entire order of 8,600 bags. Assume that the $16.00 fixed manufacturing overhead cost per unit consists of facility-level costs ($13.00/unit at the 38,000-unit output level), with the remainder being setup-related (i.e., batch-level) costs. Assume that the setup-related costs increase in total with the number of batches produced and that the facility-level fixed costs do not vary in total, with either the number of units produced or the number of batches produced during a period. $ 46 21 3 16 4 Required: 1. What is the total fixed manufacturing overhead cost for the period? Break down (that is, decompose) this total cost into its component parts (i.e., batch-related overhead costs and facility-related fixed overhead costs). 2. Calculate the relevant unit and total costs of the special order, including the new information about batch-related costs. Assume, as before, the one-time delivery cost of $5,300. 3. If accepted, how would the special order affect GGI's short-term operating income? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the total fixed manufacturing overhead cost for the period? Break down (that is, decompose) this total cost into its component parts (i.e., batch-related overhead costs and facility-related fixed overhead costs). (Round your answers to the nearest whole dollar amount.) $ Total batch-related overhead costs Facility-related overhead costs Total fixed manufacturing overhead cost 120,000 494,000 614,000 $ Required 1 Required 2 Required 3 Calculate the relevant unit and total costs of the special order, including the new information about batch-related costs. Assume, as before, the one-time delivery cost of $5,300. (Round the total cost to the nearest whole dollar amount and "per- unit relevant cost" to 2 decimal places.) S Total relevant cost for the special order Total relevant unit cost for the items in the special order 186,600 21.00 S Required 1 Required 2 Required 3 If accepted, how would the special order affect GGI's short-term operating income? Operating profit would decline by $ 58,100Step by Step Solution
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