Sherene Nili manages a company that produces wedding gowns. She produces both a custom product that is made to order and a standard product that is sold in bridal salons. Her accountant prepared the following forecasted income statement for Maroh, which is a busy month: Custom Dresses Standard Dresses Total Number of dresses Sales revenu S51.500 S10 300 20.300 S 83,000 S 18. 29.GOO Machine depreciation $31,500 $ 8,300 9,300 330 3,100 BOO 900 7.600 1.000 1.600 3,100 Heat and light Other production costs Marketing and administration Total costs Operating profit $ 49.450 $ 13,540 Ms. Nili already has orders for the 10 custom dresses reflected in the March forecasted income statement. The depreciation charges are for machines used in the respective product lines. Machines depreciate at the rate of $1 per hour based on hours used, so these are variable costs. In March, cutting and sewing machines are expected to operate for 960 hours, of which 630 hours will be used to make custom dresses. The rent is for the building space, which has been leased for several years at $7,600 per month. The rent, heat, and light are allocated to the product lines based on the amount of floor space occupied A valued customer who is a wedding consultant has asked Ms. Nili for a special favor. This customer has a client who wants to get married in early April. Ms. Nili's company is working at capacity and would have to give up some other business to make this dress. She can't renege on custom orders already agreed to, but she can reduce the number of standard dress produced in March to 10. Ms. Nili would lose permanently the opportunity to make up the last production of standard dresses because she has no unused capacity for the foreseeable future. The customer is willing to pay $25,500 for the special order. Materials and labor for the order will cost $6,300 and $10,300, respectively. The special order would require 152 hours of machine lime. Ms. Nili's company would save 165 hours of machine lime from the slandard dress business given up. Rent, heal and light, and other production costs would not be affected by the special order. Required: a-1. Calculate the differential operating profit loss). (Select option "increase" or "decrease", keeping Without special order as the base. Select "none" if there is no effect.) Without Special Order With Special Order Impact Revende Materials Labor Machine deereciation Contribution margin Rent Heat and light Other production costs Marketing and administration Operating profit (loss) a-2. From an operating profit (loss) perspective for March, should Ms. Nili accept the order? O Yes b. What is the minimum price Ms. Nili should accept to take the special order? Minimum price
