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Mohave Corp. makes several varieties of beach umbrellas and accessories. It has been approached by a company called Lost Mine Industries about producing a special
Mohave Corp. makes several varieties of beach umbrellas and accessories. It has been approached by a company called Lost Mine Industries about producing a special order for a custom umbrella called the Ultimate Shade (US). The special-order umbrelas with the Lost Mine Company logo would be distributed to participants at an upcoming convention sponsored by Lost Mine Lost Mine has offered to buy 2.200 of the US umbrellas at a price of $18 each. Mohave currently has the excess capacity necessary to accept the offer. The following information is related to the production of the US umbrella: Direct labor Direct materials $9.00 Variable manufacturing 4.00 4.50 overhead Fixed manufacturing overhead 2.50 Total cost $19.00 Regular sales price $26.00 Required: 1. Compute the incremental profit (or loss) from accepting the special order. Profit (or Loss) 2. Should Mohave accept the special order? No Yes 3. Suppose that the spacial order had been to purchase 2,700 umbrellas for $15.00 each. Recompute the incremental profit for loss from accepting the special order under this scenaria. Profit (or Loss) 4. Assume that Mohave is operating at full capacity, Calculate the special-arder price per unit at which Mahawe would be indifferent between accepting ar rejecting the special order Special Order Price per Unit
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