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 umbrellas 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 2,800 of the US umbrellas at a price of $26 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 materials	$	11.00
Direct labor		6.00
Variable manufacturing overhead		7.50
Fixed manufacturing overhead		2.50
Total cost	$	27.00
Regular sales price	$	34.00

Required: 1. Compute the incremental profit (or loss) from accepting the special order. 2. Should Mohave accept the special order?

	No
	Yes

3. Suppose that the special order had been to purchase 3,300 umbrellas for $24.00 each. Recompute the incremental profit (or loss) from accepting the special order under this scenario. 4. Assume that Mohave is operating at full capacity. Calculate the special-order price per unit at which Mohave would be indifferent between accepting or rejecting the special order.

Monave Corp makes several varieties of beach umbrellas and accessories It has been approached by a company called Lost Mine in logo would be distributed to participants at an upcoming convention sponsored by Lost Mine. Lost Mine has offered to buy 2,800 of the US umbrellas at a price of $26 each. Mohave currently has the excess capacity necessary to Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead $11.00 6.00 7.50 2.50 $27.00 $34.00 Total cost Regular sales price Required: 1. Compute the incremental profit (or loss) from accepting the special order t (or Loss) Increases by S 4,200 2. Should Mohave accept the special No Yes 3. Suppose thot the special order had been to purchase 3.300 umbrelas for $2400 each. Recompute the incremental 3. Suppose that the special order had been to purchase 3 profit or Loss) Decreases by 2. Should Mohave accept the special order? No Yes 3. Suppose that the special order had been to purchase 3.300 umbrelas for $2400 eoch Recompute the incremental profit or loss) from accepting the special c Decreases by t Ma peveing at ldlcaecr d eved e tecn bten 4. Assume t Special Order Price per Unit References eBook & Resources Worksheet Difficulty: 2 Medium