Answered step by step
Verified Expert Solution
Question
1 Approved Answer
BCGelco Manufacturing produces and sells oil filters for $3.35 each. A retailer has offered to purchase 10,000 oil filters for $3.30 per filter. Of the
BCGelco Manufacturing produces and sells oil filters for $3.35 each. A retailer has offered to purchase 10,000 oil filters for $3.30 per filter. Of the total manufacturing cost per filter of $1.90, $1.50 is the variable manufacturing cost per filter. For this special order, BCGelco would have to buy a special stamping machine that costs $8,000 to mark the customer's logo on the special-order oil filters. The machine would be scrapped when the special order is complete. This special order would use manufacturing capacity that would otherwise be idle. No variable nonmanufacturing costs would be incurred by the special order. Regular sales would not be affected by the special order. Would you recommend that BCGelco accept the special order under these conditions? Complete the following incremental analysis to help you make your recommendation. (Use parentheses or a minus sign to indicate a decrease in operating income from the special order.) Total Order Incremental Analysis of Special Sales Order DecisionP Per Unit 10,000 units) Revenue from special order Less variable expense associated with the order: Contribution margin Increase (decrease) in operating income from the special order BCGelco | accept the special sales order because it will operating income
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