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Required information Problem 1 4 - 4 5 Special Order; Financial and Production Considerations ( LO 1 4 - 4 , 1 4 - 5
Required information
Problem Special Order; Financial and Production Considerations LO
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Jupiter Corporation manufactures skateboards. Several weeks ago, the firm received a specialorder inquiry from Venus, Inc. Venus desires to market a skateboard similar to one of Jupiters and has offered to purchase units if the order can be completed in three months. The cost data for Jupiters model no skateboard follow.
Direct material $
Direct labor: hours at $
Total manufacturing overhead:
hours at $
Total $
Additional data:
The normal selling price of model no is $; however, Venus has offered Jupiter only $ because of the large quantity it is willing to purchase.
Venus requires a modification of the design that will allow a $ reduction in directmaterial cost.
Jupiters production supervisor notes that the company will incur $ in additional setup costs and will have to purchase a $ special device to 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 of $ per machine hour. This figure is based, in part, on budgeted yearly fixed overhead of $ and planned production activity of machine hours per month
Jupiter will allocate $ of existing fixed administrative costs to the order as part of the cost of doing business.
Problem Part
a Assume that Jupiters current production activity consumes percent of planned machinehour activity. Calculate the current available machinehours.
b Can the company accept the order and meet Venuss deadline?
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