Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Required information [The following information applies to the questions displayed below.] Green Grow Incorporated (GGI) manufactures lawn fertilizer. Because of the product's very high quality,
Required information [The following information applies to the questions displayed below.] Green Grow Incorporated (GGI) manufactures lawn fertilizer. Because of the product's very high quality, GGI often receives special orders from agricultural research groups. For each type of fertilizer sold, each bag is carefully filled to have the precise mix of components advertised for that type of fertilizer. GGl's operating capacity is 22,000 one-hundred-pound bags per month, and it currently is selling 20,000 bags manufactured in 20 batches of 1,000 bags each. The firm just received a request for a special order of 5,000 one-hundred-pound bags of fertilizer for $130,000 from APAC, a research organization. The production costs would be the same, but there would be no variable selling costs. Delivery and other packaging and distribution services would cause a one-time $2,500 cost for GGI. The special order would be processed in two batches of 2,500 bags each. (No incremental batch-level costs are anticipated. Most of the batch-level costs in this case are short-term fixed costs, such as salaries and depreciation.) The following information is provided about GGI's. current operations: No marketing costs would be associated with the special order. Because the order would be used in research and consistency is critical, APAC requires that GGI fill the entire order of 5,000 bags. Assume that the $12.00 fixed manufacturing overhead cost per unit consists of facility-level costs ($9.00/ unit at the 20,000-unit output level), with the remainder being setup-related (i.e., batch-level) costs. Assume that the setup-related costs increase in total with the number of batches produced and that the facility-level fixed costs do not vary in total, with either the number of units produced or the number of batches produced during a period. quired: Vhat is the total relevant cost of filling this special sales order? What would be the change in operating income if the special order is accepted? What is the hreakeven sellinn nrice ner unit for the snerial sales nrder li e what is the selling nrice that would result in a zern effect
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