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Case Study 6 Mercury Skateboard Company manufactures skateboands. Several weeks ago. He imm received special-onder inquiry from Venus, Inc. Venus desines to market a skateboand similar to one of Mereury' and has ofrered to purchase 11,000 units if the order can be completed in three months. The cost data fod Mencury's Champion model skateboard follow. Direct matorial Direct ratuor: 25 hours at \\( \\$ 18.00 \\) Total manufacturing overnoad: 5 machino hours at \\( \\$ 40.00 \\) Total \\( \\$ 16.40 \\) 4.50 \\( \\frac{20.00}{\\$ 40.90} \\) The following additional information is available. - The normal selling price of the Champion model is \\( \\$ 53.00 \\) : however. Venus has ofrered Mercury only \\( S 31.50 \\) because of the large quantity it is willing to purchase. - Venus requires a modification of the design that will allow a 54 . 20 reduction in direct-material cosr. - Mercury's production supervisor notes that the company will incur \\( \\$ 7.400 \\) in additional setup costs and will have to purchase a \\( \\$ 4.800 \\) special device 10 manufacture these units. The device will be discarded once the special order is completed. - Total manufacturing overhead costs are applied to production at the rate or 540 per machine hour. This figure is based, in part, on budgeted yearly fixed overhead of \\( \\$ 1.500 .000 \\) and planned productron activity of 60.000 machine hours (5,000 per month). - Mercury will allocate \\( \\$ 3.600 \\) or existing rixed administrative costs to the order as \". - pare of the Requirea: 1. Assume that present sales will not be affected. Should the order be aceepted rrom a rinancial poin of view (i.e.. is it profitable)? Why? Show calculations. 2. Assume that Mercury's current production activity consumes 70 percent of planned machine-hour activity. Can the company aceept the order and meet Venus\" deadine? 3. What options might Mercury consider if management truly wanted to do busincss tvith Venus in hopes of building a long-term relationship with the firm? Case Study 6 Mercury Skateboard Company manufactures skateboands. Several weeks ago. He imm received special-onder inquiry from Venus, Inc. Venus desines to market a skateboand similar to one of Mereury' and has ofrered to purchase 11,000 units if the order can be completed in three months. The cost data fod Mencury's Champion model skateboard follow. Direct matorial Direct ratuor: 25 hours at \\( \\$ 18.00 \\) Total manufacturing overnoad: 5 machino hours at \\( \\$ 40.00 \\) Total \\( \\$ 16.40 \\) 4.50 \\( \\frac{20.00}{\\$ 40.90} \\) The following additional information is available. - The normal selling price of the Champion model is \\( \\$ 53.00 \\) : however. Venus has ofrered Mercury only \\( S 31.50 \\) because of the large quantity it is willing to purchase. - Venus requires a modification of the design that will allow a 54 . 20 reduction in direct-material cosr. - Mercury's production supervisor notes that the company will incur \\( \\$ 7.400 \\) in additional setup costs and will have to purchase a \\( \\$ 4.800 \\) special device 10 manufacture these units. The device will be discarded once the special order is completed. - Total manufacturing overhead costs are applied to production at the rate or 540 per machine hour. This figure is based, in part, on budgeted yearly fixed overhead of \\( \\$ 1.500 .000 \\) and planned productron activity of 60.000 machine hours (5,000 per month). - Mercury will allocate \\( \\$ 3.600 \\) or existing rixed administrative costs to the order as \". - pare of the Requirea: 1. Assume that present sales will not be affected. Should the order be aceepted rrom a rinancial poin of view (i.e.. is it profitable)? Why? Show calculations. 2. Assume that Mercury's current production activity consumes 70 percent of planned machine-hour activity. Can the company aceept the order and meet Venus\" deadine? 3. What options might Mercury consider if management truly wanted to do busincss tvith Venus in hopes of building a long-term relationship with the firm