Rogers Corporation prepared a budget last period that called for sales of 20,000 units at a price of $30 each.The production costs per unit were estimated to amount to $14.00 variable and $6.00 fixed. All selling and administrative costs were fixed at $50,000.During the period, production was 22,000 units. The actual selling price was $33.00 per unit.

Actual variable costs were $16.00 per unit and actual fixed production costs totaled $66,000. Selling and administrative costs were 10% higher than the budgeted amounts.

Required:

a) Show operating statements for the actual output, as well as a static budget and a flexible budget.

b) Explain what is indicated when comparing the operating statements.

Kelly Technologies has a capacity of 400,000 computer monitors per year.The company is currently producing and selling 200,000 monitors per year at a selling price of $300 per monitor. The cost of producing and selling one monitor at the 200,000-unit level of activity follows:

Variable Manufacturing Costs $100

Fixed Manufacturing Costs 35

Variable Selling and Administrative Costs 50

Fixed Selling and Administrative Costs 15

Total Costs $200

The company has received a special order for 20,000 monitors at a price of $175 per monitor.As it need not pay a sales commission on the special order, the variable selling and administrative costs would be only $40 per monitor.The special order would have no effect on total fixed costs.The company has rejected the offer based on the following computations:

Selling Price per Monitor $175

Variable Manufacturing Costs 100

Fixed Manufacturing Costs 50

Variable Selling and Administrative Costs 40

Fixed Selling and Administrative Costs 15

Net Loss per Monitor $(30)

Management is reviewing its decision and wants your advice.

Required:

a) Should Kelly accept the special order?Show your computations.

b) Discuss the pros and cons of accepting a special order.