Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Question #2 (11 points): EasyFlow is a manufacturer of ball point pens. The pens wholesale for $15 per dozen. EasyFlow has been approached by
Question #2 (11 points): EasyFlow is a manufacturer of ball point pens. The pens wholesale for $15 per dozen. EasyFlow has been approached by a major franchise with a special order for 75,000 dozen pens for a special promotional campaign at $10 per dozen. In addition to the usual logo printed on the pen the customer wants a special emblem attached. The emblem will cost EasyFlow $0.25 per dozen. Specialized equipment to attach the emblem will be needed. The equipment cost is $8,000 and is expected to have no use after this order. EasyFlow's total cost of production is $11 per dozen pens, as follows: Variable costs: Direct materials $5.75 Direct labour 1.00 Variable overhead 1.75 Fixed overhead Total cost 2.50 $11.00 Required (Put your answers in the space of next page): (1) Assuming EasyFlow has excess capacity, prepare an incremental analysis to determine whether EasyFlow should accept the special order. (Please state your decision after showing your calculation). (2) Assuming EasyFlow only has limited capacity to produce 55,000 dozen pens, what is the minimum price of the special order that is acceptable to EasyFlow?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started