Kneller Company manufactures and sells medals for winners of athletic and other events. Its manufacturing plant has the capacity to produce 17,000 medals each month;
Kneller Company manufactures and sells medals for winners of athletic and other events. Its manufacturing plant has the capacity to produce 17,000 medals each month; current monthly production is 10,000 medals. The company normally charges $97 per medal. Cost data for the current level of production are shown below:
| Variable costs: | |
|---|---|
| Direct materials | $ 470,200 |
| Direct labor | $ 150,500 |
| Selling and administrative | $ 24,400 |
| Fixed costs: | |
| Manufacturing | $ 140,800 |
| Selling and administrative | $ 77,000 |
The company has just received a special one-time order for 400 medals at $84 each. For this particular order, no variable selling and administrative costs would be incurred. This order would also have no effect on fixed costs. Assume that direct labor is a variable cost.
Required:
Should the company accept this special order?
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Authors: Ray H. Garrison, Alan Webb, Theresa Libby
12th Canadian Edition
1260193276, 978-1260193275
