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I'm not sure if the numbers in the boxes are correct, so please let me know! Thanks :) Special-Order Decision Rianne Company produces a light
I'm not sure if the numbers in the boxes are correct, so please let me know! Thanks :)
Special-Order Decision Rianne Company produces a light fixture with the following unit cost: Direct materials $2 Direct labor 1 Variable overhead 3 Fixed overhead 2 $8 Unit cost The production capacity is 300,000 units per year. Because of a depressed housing market, the company expects to produce only 180,000 fixtures for the coming year. The company also has fixed selling costs totaling $500,000 per year and variable selling costs of $1 per unit sold. The fixtures normally sell for $12 each. At the beginning of the year, a customer from a geographic region outside the area normally served by the company offered to buy 100,000 fixtures for $7 each. The customer also offered to pay all transportation costs. Since there would be no sales commissions involved, this order would not have any variable selling costs. Required: 1. Conceptual Connection: Based on a quantitative (numerical) analysis, should the company accept the order? the quantitative analysis is $ 100,000 in favor of accepting Yes the special order. 2. CONCEPTUAL CONNECTION What qualitative factors might impact the decision? Assume that no other orders are expected beyond the regular business and the special order. The company is faced with a problem of idle capacity. Accepting the special order would bring production up to near capacity and allow the company to avoid The company is faced with a problem of idle capacity. Accepting the special order would bring production up to near capacity and allow the company to avoid laying off employees. The special-order price is well below the company's normal price. Will this have a potential impact on regular customers? Considering the fact that the customer is located in a region not usually served by the company. Both 1 and 2 None of the above. The company is faced with a problem of idle capacity. Accepting the special order would bring production up to near capacity and allow the company to avoid laying off employeesStep by Step Solution
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