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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 Utimate 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 2,700 of the US umbrellas at a price of $25 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 Direct labor Variable manufacturing overhcad Fxod manufacturing overhcad 11.00 6.00 7.00 2.50 Total cost Regular sales price $33.00 Required: 1. Compute the incremental profit (or loss) from accepting the special order Profit (or Loss) by 2. Should Mohave accept the special order? Yes No 3. Suppose that the special order had been to purchase 3,200 umbrellas for $2300 each Recompute the Incremental profit (or loss) from accepting the speclial order under this scenario It(or Loss) by 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 l Order Price per Unit
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