Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Corporate Wellness Ltd. is considering a special order of 20 exercise bikes to be manufactured for a customer. The normal selling price of an exercise

Corporate Wellness Ltd. is considering a special order of 20 exercise bikes to be manufactured for a customer. The normal selling price of an exercise bike is $500 and its unit product cost is $300.00 as shown below:

Direct Material

$145

Direct Labour

$105

Manufacturing Overhead

$50

Unit Product Cost

$300

Most of the manufacturing overhead is fixed and unaffected by variations in how many bikes are produced in any given period. However, $10 of the overhead is variable with respect to the number of bikes produced. The customer who is interested in the special order would like special decorations applied. These decorations would require additional materials costing $10 per bike and would also require acquisition of a special tool costing $465 that would have no other use once the special order is completed. This order would have effect on the company's regular sales. Specifically, accepting this order means that the company will not be able to manufacturing 5 units of its existing order.

Required:

What effect would accepting this order have on the company's net operating income if a special price of $460 is offered per bike for this order? Should the special order be accepted at this price?

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

Step: 3

blur-text-image

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

Modern Advanced Accounting In Canada

Authors: Hilton Murray, Herauf Darrell

9th Edition

1259654699, 978-1259654695

More Books

Students also viewed these Accounting questions

Question

3. Im trying to point out what we need to do to make this happen

Answered: 1 week ago

Question

1. I try to create an image of the message

Answered: 1 week ago