Question
San Diego Toy Company produces Zany Pencils. These pencils are manufactured with a monster head in place of an eraser to make them more attractive
San Diego Toy Company produces Zany Pencils. These pencils are manufactured with a monster head in place of an eraser to make them more attractive to children and are sold with 12 in a package. A large school district has requested to submit a special order for their first grade classes to use. The special order would consist of 50,000 packages with a total sales price of $115,000.
Production, marketing and other costs (per package): | |
Direct materials | $ 0.50 |
Direct labor | $ 0.70 |
Variable overhead | $ 0.80 |
Fixed overhead | $ 0.35 |
Variable marketing | $ 0.07 |
Fixed marketing | $ 0.38 |
Insurance, taxes and administrative salaries | $ 0.90 |
Additional cost for the special order: | |
Design | $ 8,350 |
Other setup costs | $ 10,750 |
There are no marketing costs associated with the special order. The company would not have to interrupt their regular production if they accept the special order.. Required: 1. Decide whether or not San Diego Toy Company should accept the special order using only a short-term financial analysis.
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