Green Grow Incorporated (GGI) manufactures lawn fertilizer. Because of the product's very high quality, GGI often receives special orders from agricultural research groups. For each type of fertilizer sold, each bag is carefully filled to have the precise mix of components advertised for that type of fertilizer. GGl's operating capacity is 23,000 one-hundred-pound bags per month, and it currently is selling 21,000 bags manufactured in 21 batches of 1,000 bags each. The firm just received a request for a special order of 5,200 one-hundred-pound bags of fertilizer for $131,000 from APAC, a research organization. The production costs would be the same, but there would be no variable selling costs. Delivery and other packaging and distribution services would cause a one-time $1,600 cost for GGI. The special order would be processed in two batches of 2,600 bags each. (No incremental batch-level costs are anticipated. Most of the batch-level costs in this case are short-term fixed costs, such as salaries and depreciation.) The following information is provided about GGl's current operations: No marketing costs would be associated with the special order. Because the order would be used in research and consistency is critical, APAC requires that GGI fill the entire order of 5,200 bags. Assume that the $10.00 fixed manufacturing overhead cost per unit consists of facility-level costs ($7.00/ unit at the 21,000 unit output level), with the remainder being setup-related (i.e., batch-level) costs. Assume that the setup-related costs increase in total with the number of batches produced and that the facility-level fixed costs do not vary in total, with either the number of units produced or the number of batches produced during a period. Required: 1. What is the total relevant cost of filling this special sales order? 2. What would be the change in operating income if the special order is accepted? 3. What is the breakeven selling price per unit for the special sales order (i.e., what is the selling price that would result in a zero effect on operating income)? 4. Prepare comparative income statements, using the contribution format, for both the current situation and assuming the special order is accepted at the breakeven price determined in requirement 3. Complete this question by entering your answers in the tabs below. What is the total relevant cost of filling this special sales order? Complete this question by entering your answers in the tabs below. What would be the change in operating income if the special order is accepted? Complete this question by entering your answers in the tabs below. What is the breakeven selling price per unit for the special sales order (i.e., what is the selling price that would result in a zero effect on operating income)? (Round your answer to 2 decimal places.) Prepare comparative income statements, using the contribution format, for both the current situation and assuming the special order is accepted at the breakeven price determined in requirement 3
