Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Award Plus Company manufactures medals for winners of athletic events and other contests. Its manufacturing plant has the capacity to produce 1 0 , 0

Award Plus Company manufactures medals for winners of athletic events and other contests. Its manufacturing plant has the capacity to produce 10,000 medals each month; current monthly production is 7,580 medals. The company normally charges $245 per medal. Variable costs and fixed costs for the current activity level follow:
Current Product Costs
Variable costs
Manufacturing
Labor $ 379,000
Material 303,200
Marketing 189,500
Total variable costs $ 871,700
Fixed costs
Manufacturing $ 279,000
Marketing 229,000
Total fixed costs $ 508,000
Total costs $ 1,379,700
Award Plus has just received a special one-time order for 2,420 medals at $135 per medal. For this particular order, no variable marketing costs will be incurred. Cathy Senna, a management accountant with Award Plus, has been assigned the task of analyzing this order and recommending whether the company should accept or reject it. After examining the costs, Senna suggested to her supervisor, Gerard LePenn, who is the controller, that they request competitive bids from vendors for the raw materials because the current quote seems high. LePenn insisted that the prices are in line with those of other vendors and told her that she was not to discuss her observations with anyone else. Senna later discovered that LePenn is a brother-in-law of the owner of the current raw materials supply vendor.
Required:
1. Calculate both the old (i.e., prior to the special order) average cost per unit and the revised average cost per unit, including the effect of the special sales order.
2. What is the short-term effect on operating profit if Award Plus Company accepts the special sales order?
3. What is the breakeven selling price per unit for the special sales order?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Credentialing Audits Tools For Compliance And Reduced Liability

Authors: CPMSM Vicki L. Searcy

1st Edition

1578398584, 978-1578398584

More Books

Students also viewed these Accounting questions

Question

What are the need and importance of training ?

Answered: 1 week ago

Question

What is job rotation ?

Answered: 1 week ago