L01, 2, 4 P17-30. Special Order Cruise Company produces a variety of electric scooters. Management follows a pricing policy of manu- facturing cost plus 60 percent. In response to a request from Pulse Cycles, LLC, the following price has been developed for an order of 300 scooters (the smallest scooter Cruise produces): Manufacturing costs Markup (6096) 54,000 Pulse Cycles rejected this price and offered to purchase the 300 scooters at a price of $120,000. The following additional information is available: .Cruise has sufficient excess capacity to produce the scooters Factory overhead is applied on the basis of direct labor dollars. Budgeted factory overhead is $800,000 for the current year. Of this amount, $200,000 is fixed. Of the S36,000 of factory overhead assigned to the Pulse Cycles order, only $27,000 is driven by the special order $9,000 is a fixed cost. .Selling and administrative expenses are budgeted as follows: Variable.. . $40 per unit manufactured and sold .. . .. . .. . . . . . .. . . . . . .. . .. . . . . . . . . .. . .. . . . Required a. The president ofCruise wants to know if he should allow Pulse Cvcles to have the scooters for $120,000. Determine the effect on profits of accepting Pulse Cycles' offer b. Briefly explain why certain costs should be onlted irom the analysis in requirement (a) c. AssumeCruise is operating at capacity and could sell the 300 scooters at its regular markup 1. 2. Determine the opportunity cost of accepting Pulse Cycles' offer. Determine the effect on profits of accepting Pulse Cycles' offer d. What other factors should Cruise consider before deciding to accept the special order? L01, 2, 4 P17-30. Special Order Cruise Company produces a variety of electric scooters. Management follows a pricing policy of manu- facturing cost plus 60 percent. In response to a request from Pulse Cycles, LLC, the following price has been developed for an order of 300 scooters (the smallest scooter Cruise produces): Manufacturing costs Markup (6096) 54,000 Pulse Cycles rejected this price and offered to purchase the 300 scooters at a price of $120,000. The following additional information is available: .Cruise has sufficient excess capacity to produce the scooters Factory overhead is applied on the basis of direct labor dollars. Budgeted factory overhead is $800,000 for the current year. Of this amount, $200,000 is fixed. Of the S36,000 of factory overhead assigned to the Pulse Cycles order, only $27,000 is driven by the special order $9,000 is a fixed cost. .Selling and administrative expenses are budgeted as follows: Variable.. . $40 per unit manufactured and sold .. . .. . .. . . . . . .. . . . . . .. . .. . . . . . . . . .. . .. . . . Required a. The president ofCruise wants to know if he should allow Pulse Cvcles to have the scooters for $120,000. Determine the effect on profits of accepting Pulse Cycles' offer b. Briefly explain why certain costs should be onlted irom the analysis in requirement (a) c. AssumeCruise is operating at capacity and could sell the 300 scooters at its regular markup 1. 2. Determine the opportunity cost of accepting Pulse Cycles' offer. Determine the effect on profits of accepting Pulse Cycles' offer d. What other factors should Cruise consider before deciding to accept the special order
