Cruise Company produces a variety of electric scooters. Management follows a pricing policy of manufacturing cost plus 60 percent. in response to a request from Pulse Cycles LLC, the following price has been developed for an order of 300 scooters (the smallest scooters Cruise produces). See attachment.

Pulse Cycles rejected this price and offered to purchase 300 scooters at a price of $120,000. The following additional information is available:

• Cruise has sufficient excess capacity to produce the scooters
• Factory overhead is applied on the basis of direct labour hours
• Budgeted factory overhead is $800,000 for the current year. Of this amount, $200,000 is fixed. Of the $36,000 of factory overhead assigned to Pulse Cycles order, only $27,000 is driven by the special order, $9000 is fixed cost.
• Selling and admin expenses are budgeted as follows (see attachment).

Required:

a) The president of Cruise wants to know if he should allow Pulse Cycles to have the scooters for $120,000. Determine the effect on profits of accepting Pulse Cycles' offer.

b) Briefly explain why certain costs should be omitted from the analysis in requirement in a.

c) Assume Cruise is operating at capacity and could sell the 300 scooters at its regular markup.

1.Determine the opportunity costs of accepting Pulse Cycles' offer.

2.Determine the effect on profits of accepting Pulse Cycles' offer.

d) What other factors should Cruise consider before deciding to accept the special order?

Module 17 Relevant Costs and Benefits for Decision Making P17-30. Special Order Company produces a variety of electric scooters. Management follow, -pacing policy of my ing cost plus 60 percent. In response to a request from Pulse Cycles, blaine following price P1 been developed for an order of 300 scooters (the smallest scooter Cruise produces): Manufacturing costs . . . Direct materials. . . .. . . .. $24.000 Direct labor . . . . 30.060 Factory overhead . .. 38,000 Total . . . . . . . 90,000 Markup (60%). . . . 54,000 Selling price . .. $144,000 Pulse Cycles rejected this price and offered to purchase the 300 scooters at a price of $120,000. The following additional information is available: . Cruise has sufficient excess capacity to produce the scooters. Factory overhead is applied on the basis of direct labor dollars. Budgeted factory overhead is $800,000 for the current year. Of this amount, $200,000 is fixed. Of the $36,000 of factory overhead assigned to the Pulse Cycles order, only $27,000 is driven by the special order; $9,000 is a fixed cost. Selling and administrative expenses are budgeted as follows: Fixed. . .. . . Variable.. $180,000 per year $40 per unit manufactured and sold Required a. The president of Cruise wants to know if he should allow Pulse Cycles to have the scooters for $120,000. Determine the effect on profits of accepting Pulse Cycles' offer. b. Briefly explain why certain costs should be omitted from the analysis in requirement (a). C. Assume Cruise is operating at capacity and could sell the 300 scooters at its regular markup. 1. Determine the opportunity cost of accepting Pulse Cycles' offer. 2. Determine the effect on profits of accepting Pulse Cycles' offer. Special Order d. What other factors should Cruise consider before deciding to accept the special order? Every Halloween, Peterson's Ice Cream Shop offers a trick-or-treat package of 25 coupons for coupons are redeemable by children 12 ve he now