Question 4 13 Marks Trophy Manufacturers manufacture medals for winners of athletic events and other contests. Its manufacturing plan has the capacity to produce 11,000 medals each month. Current production and sales are 10,000 medals per month. The company normally charges $150 per medal. Cost information for the current activity is as follows: Variable costs that vary with number of units produced: Direct materials Direct manufacturing labour $350,000 375,000 Variable costs (for setups, materials handling, quality control and so on) that vary with number of batches, 200 batches x $500 per batch 100,000 Fixed manufacturing costs 300,000 Fixed marketing costs 275,000 Total costs $1,400,000 Trophy Manufacturers has just received a special one-time-only order for 1,000 medals at $100 per medal. Accepting the special order would not affect the companys regular business. Trophy Manufacturers makes medals for its existing customers in batches of 50 medals (200 batches x 50 medals per batch = 10,000 medals). The special order required Trophy Manufacturers to make the medals in 25 batches of 40 medals. Question 4 continued over next page Term 1 STANDARD Examination 2016 Foundations of Management Accounting ACCT20076 Page 11 of 11 Question 4 continued a) Should Trophy Manufacturers accept this special order? Why? ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ (2 marks) b) Show your calculations in separate columns indicating costs without one-time only special order and costs with one-time only special order. Without One- Time Only Special Order 11,000 Units With One-Time Only Special Order 11,000 Units (11 marks) - End