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 March, which is a busy month.

Custom

Dresses

Standard

Dresses

Total

Number of dresses

10

20

30

Sales revenue

$

50,000

$

30,000

$

80,000

Materials

$

10,000

$

8,000

$

18,000

Labor

20,000

9,000

29,000

Machine depreciation

600

300

900

Rent

4,200

2,800

7,000

Heat and light

1,000

600

1,600

Other production costs

2,800

Marketing and administration

7,700

Total costs

$

67,000

Operating profit

$

13,000

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 900 hours, of which 600 hours will be used to make custom dresses. The rent is for the building space, which has been leased for several years at $7,000 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 dresses produced in March to 10. Ms. Nili would lose permanently the opportunity to make up the lost production of standard dresses because she has no unused capacity for the foreseeable future. The customer is willing to pay $24,000 for the special order. Materials and labor for the order will cost $6,000 and $10,000, respectively. The special order would require 140 hours of machine time. Ms. Nili's company would save 150 hours of machine time from the standard dress business given up. Rent, heat and light, and other production costs would not be affected by the special order.

Required:

a-1. Calculate the differential operating profit (loss).

a-2. From an operating profit (loss) perspective for March, should Ms. Nili accept the order?

b. What is the minimum price Ms. Nili should accept to take the special order?

and ilght are allocated to the product ines based on the amount of floor space occupled. A valued customer, who is a wedding consultant, has asked Ms. Nili for a special favor. This customer has a cllent who wants to get marned in early April. Ms. Nir'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 dresses produced in March to 10 . Ms. Nili would lose permanently the opportunity to make up the lost production of standard dresses because she has no unused capacity for the foreseeable future. The customer is willing to pay $24,000 for the special order. Materfals and labor for the order will cost $6,000 and $10,000, respectively. The speclal order would require 140 hours of machine time. Ms. Nir's company would save 150 hours of machine time from the standard dress business given up. Rent, heat and light, and other production costs would not be affected by the special order. Required: a-1. Calculate the differential operating profit (loss). a-2. From an operating profit (loss) perspective for March, should Ms. Nill accept the order? b. What is the minimum price Ms. Nili should accept to take the special order? Complete this question by entering your answers in the tabs below. What is the minimum price Mx, Witi should accept to take the ipecial erder? Calculaten the differential operating profit (loss). (Select option "increase" or "decrease", keeping Witheot apecial order as the base. Select "none" if there is no effect.) 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 March, which is a busy month. Ms. Nil already has orders for the 10 custom dresses refiected in the March forecasted income statement. The depreciation charges are for machines used in the respective product ilines. Machines depreclate at the rate of 5i per hour based on hours used, so these are variable costs in March, cutting and sewing machines are expected to operate for 900 hours, of which 600 hours will be used to make custom oresses. The rent is for the bullaing space, which has been leased for several years at \$,000 permonth. The rent, heat. and ight are allocoted to the proouct lines bosed on the amount of floor space occupled