Question
Peters, Inc. has a production capacity of 150,000. Te company sells a single product and reports the following results from sales of 100,000 units. Sales
Peters, Inc. has a production capacity of 150,000. Te company sells a single product and reports the following results from sales of 100,000 units. Sales ($45/unit) $4,500,000 Less Costs & expenses: Direct Materials ($16/unit) $1,600,000 Direct Labor ($9/unit) 900,000 Variable Overhead ($3/unit) 300,000 Fixed overhead ($8.10/unit) 810,000 Varaible Administrative ($4.50/unit) 450,000 Fixed administrative ($4/unit) 400,000 ------------------ Total costs $(4,460,000) ------------------- Operating Income $ 40,000 =========== A foreign company wants to purchase 15,000 units. However, they are willing to pay only $36 per unit for this one time order. They also agree to pay all freigh costs. To fill the order, Ryder will incur normal production costs. Total fixed overhead will have to be increased by $60,000 to pay for equipment rentals and insurance. No additional adminstrative costs (variable or fixed) will be incurred in association with this special order. Required: Determeine whether or not Peters accpet the order if it does not affect regular sales (HINT: PREPARE A CONTRIBUTION MARGIN INCOME STATEMENT FOR THE SPECIAL ORDER). What other financial concerns might be associated with this special order? "PLEASE BE SPECIFIC ON HOW YOU GET THE NUMBERS"
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