Question
Dana manufactures a single product with the following full unit costs for 3,000 units: Direct materials $80 Direct labor 40 Manufacturing overhead (40% variable) 120
Dana manufactures a single product with the following full unit costs for 3,000 units:
Direct materials | $80 |
Direct labor | 40 |
Manufacturing overhead (40% variable) | 120 |
Selling expenses (60% variable) | 40 |
Administrative expenses (10% variable) | 20 |
Total per unit | $300 |
A company recently approached Dana with a special order to purchase 500 units for $300. Dana currently sells the models to dealers for $550. Capacity is sufficient to produce the extra 1,000 units. No selling expenses would be incurred on the special order.
Required:
a. Ignoring the special order, determine Dana's profit on production and sales of 3,000 units. Ignore taxes in these analyses.
b. Should Dana accept the special order if its goal is to maximize short-run profits?Determine the impact on profit of accepting the order.
c. Determine the minimum price Dana would want, to increase before tax profits by $80,000 on the special order.
d. When making a special order decision, what non-quantitative aspects of the decision should Dana consider?
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