Question
HELP Apex Company produces artificial Christmas trees. A local shopping mall recently made a special orderoffer; the shopping mall would like to purchase 200 extraminuslarge
HELP |
Apex Company produces artificial Christmas trees. A local shopping mall recently made a special orderoffer; the shopping mall would like to purchase 200 extraminuslarge white trees. Apex Company is currently producing and selling20,000 trees; the company has the excess capacity to handle this special order. The shopping mall has offered to pay$120 for each tree. An accountant at Apex Company provides an estimate of the unit product cost asfollows:
Direct materials | $50.00 |
Direct labor(variable) | $3.50 |
Variable manufacturing overhead | $1.00 |
Fixed manufacturing overhead | $4.00 |
Total unit cost | $14.50 |
This special order would require an investment of$10,000 for the molds required for the extraminuslarge trees. These molds would have no other purpose and would have no salvage value. The special order trees would also have an additional variable cost of$5.00 per unit associated with having a white tree. This special order would not have any effect on thecompany's other sales. If the special order isaccepted, thecompany's operating income would increase(decrease) by
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