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Rowe Tool and Die ( RTD ) produces metal fittings as a supplier to various manufacturing firms in the area. The following is the forecasted
Rowe Tool and Die RTD produces metal fittings as a supplier to various manufacturing firms in the area. The following is the forecasted income statement for the next quarter, which is the typical planning horizon used at RTD RTD expects to sell units during the quarter. RTD carries no inventories.
Amount Per Unit
Sales revenue $ $
Costs of fitting produced
Gross profit $ $
Administrative costs
Operating profit $ $
Fixed costs included in this income statement are $ for depreciation on plant and machinery and miscellaneous factory operations and $ for administrative costs. RTD has received a request for fittings to be produced in the next quarter from Endicott Manufacturing. Endicott has never purchased from RTD although they have been a local company for many years. Endicott has offered to pay $ per unit. RTD can easily produce the units with its existing capacity. Production of the units will incur all variable manufacturing costs but no fixed manufacturing costs. No administrative costs will be incurred because of the order.
Required:
a What impact would accepting this special order have on operating profit?What impact would accepting this special order have on operating profit? Enter your answers in thousands rounded to decimal place. ie should be entered as Select option "higher" or "lower", keeping Status Quo as the base. Select "none" if there is no effect.
Costs and Revenues
Thousands of Dollars
Status Quo Units Alternative Units Difference
Sales revenue
Variable costs:
Production
Administrative
Contribution margin
Fixed costs
Operating profit
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