Question
b. Fine Juice Limited manufactures and sells organic juice for special events. Its manufacturing plant has the capacity to produce 17,000 bottles each month; its
b. Fine Juice Limited manufactures and sells organic juice for special events. Its manufacturing plant has the capacity to produce 17,000 bottles each month; its current monthly production is 15,500 bottles. The company's regular selling price is $120 per bottle. The following data are provided for the current level of production:
Variable costs: | ($) |
Direct materials | 850,000 |
Directlabour | 475,000 |
Selling and administrative | 17,000 |
Fixed costs: | |
Manufacturing | 705,175 |
Selling and administrative | 265,675 |
The company has just received a special one-time order for 950 bottles at $86 each. This order would not affect fixed costs.
Required:
i) Should the company accept this special order? Explain your answers.
(4 marks)
Type in answers to Question 4. b. i. (expand the space as needed) |
ii) Assume that no variable selling and administrative costs would be incurred for this particular order. All other data presented above would remain the same. Should the company accept this special order? Explain your answers.
(4 marks)
Type in answers to Question 4. b. ii. (expand the space as needed) |
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