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D. Lawrance designs and manufactures fashionable mens clothing. For the coming year, the company has scheduled production of 40,000 suede jackets. Budgeted costs for this
D. Lawrance designs and manufactures fashionable mens clothing. For the coming year, the company has scheduled production of 40,000 suede jackets. Budgeted costs for this product are as follows: Unit Costs (40,000 units) Total Variable manufacturing costs $50 $2,000,000 Variable selling expenses 20 800,000 Fixed manufacturing costs 10 400,000 Fixed operating expenses 5 200,000 Total costs and expenses $85 $3,400,000 The management of D. Lawrance is considering a special order from Discount Apparel for an additional 10,000 jackets. These jackets would carry the Discount Apparel label, rather than the D. Lawrance label. In all other respects they would be identical to the regular D. Lawrance jackets. Although D. Lawrance regularly sells its jackets to retail stores at a price of $150 each. Discount apparael has offered to pay on $80 per jacket. HOwever, because no sales commissions would be involved with this special order, D Lawarance will incur variable selling expenses of only $5 per unit on these sales, rather than the $20 it normally incurs. Accepting the order would cause no change in the companys fixed manfacturing costs or fixed operating costs. D Lawrance has enough plant capacity to produce 55,000 jackets per year. A.Using incremental revenue and incremental costs, compute the expected effect of accepting this special order on D Lawrances operating income. B.Briefly discuss any other factors that you believe D Lawrances management should consider in deciding whether to accept the special order. Include nonfinancial as well as financial considerations. WELL THIS IS THE HW PROBLEM GREATLY APPRECIATE THE HELP THANK YOU
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