Question
circus toys produces a plastic three-ring circus set. the set sells for $97. the capacity of the plant is 20,000 sets per year. production costs
circus toys produces a plastic three-ring circus set. the set sells for $97. the capacity of the plant is 20,000 sets per year. production costs are as follows for 20,000 sets:
Per Unit
direct materials $10.00
direct labor. $ 15.00
variable overhead. $ 20.00
variable selling costs. $ 5.00
Fixed overhead. $ 40.00
total cost. $90.00
a Canadian store, which had previously not purchased from circus toys, has approached the marketing manager about buying 6,000 sets for $88.50/set. no selling expenses would be incurred in this offer, but the Canadian firm wants its store name put on the package, which means an additional $1 cot per unit to circus toys. because the company is currently selling 19,000 sets, acceptance of this special order would required it to reject some of its current business.
how much better or worse off is circus toys if they accept the special order ?show computations.
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