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Belle Limited manufactures sleighs at its factory in Northern Canada. The factory has the capacity to produce 1,500 sleighs per month and sells them for
Belle Limited manufactures sleighs at its factory in Northern Canada. The factory has the capacity to produce 1,500 sleighs per month and sells them for $10,000 each. Belle is currently manufacturing 1,000 sleighs per month with the following costs per sleigh: Direct materials $1,500 Direct labour 1,000 Variable manufacturing overhead 1,100 Fixed manufacturing overhead 900 Variable selling costs 500 Belle has received a one-time special order from a customer in the North Pole for 200 sleighs at a price of $6,500 each. Belle will be able to reduce the variable selling costs by $20 per sleigh. The special-order sleighs will require a slight modification that will increase the direct materials cost by $50/sleigh. In addition, the design modification will incur a one-time set up fee of $1,000 Required: 1. Should Belle Limited accept the special order? 2. Assume that the capacity of the factory is 1,100 sleighs instead of 1,500. Do you think Belle should accept the special order? Provide calculations & qualitative considerations
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