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Ranger Ltd. has an annual plant capacity of 2,800,000 units of output. Its regular operations for the year are budgeted as follows: Revenues, 2,
Ranger Ltd. has an annual plant capacity of 2,800,000 units of output. Its regular operations for the year are budgeted as follows: Revenues, 2, 000, 000 units at 38 each Manufacturing costs: Variable Fixed Marketing and administrative costs: Variable (sales commissions) Fixed 76,000,000 25 per unit 18,000,000 6 per unit 2,000,000 Ranger has been contacted about supplying a one-time - only special order of 60,000 units at a selling price of 32 each, subject to half the usual sales commission per unit. a) Would this order increase Ranger's profit for the coming year? [10 marks] b) Now suppose that the custom order request is instead for 1,000,000 units at a selling price of 36 each, subject to half the usual sales commission per unit. Also, suppose Ranger could increase its capacity to 3,000,000 units if it increased its fixed manufacturing costs by 8,000,000, and that this could occur in time to process the custom order. Would this order increase Ranger's profit for the coming year?
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a To determine whether the onetime special order of 60000 units at a selling price of 32 each would increase Ranger Ltds profit for the coming year we ...Get Instant Access to Expert-Tailored Solutions
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