Smooth Move Company manufactures professional paperweights and has been approached by a new customer with an offer to purchase 15,000 units at a per-unit price of $8.00. The new customer is geographically separated from Smooth Move's other customers, and existing sales will not be affected. Smooth Move normally produces 95,000 units but plans to produce and sell only 65,000 in the coming year. The normal sales price is $14 per unit. Unit cost information is as follows: Direct materials $3.10 Direct labor 2.75 Variable overhead 1.15 Fixed overhead 1.80 Total $8.80 If Smooth Move accepts the order, no fixed manufacturing activities will be affected because there is sufficient excess capacity Required: 1. What are the alternatives for Smooth Move? Accept or reject the special order 2. CONCEPTUAL CONNECTION: Should Smooth Move accept the special order? Yes By how much will profit increase or decrease if the order is accepted? Increase VSE Smooth Move Company manufactures professional paperweights and has been approached by a new customer with an offer to purchase 15,000 units at a per-unit price of $7.00. The new customer is geographically separated from Smooth Move's other customers, and existing sales will not be affected. Smooth Move normally products 96,000 units but plans to produce and sell only 65,000 in the coming year. The normal sales price is $12 per unit. Unit cost information is as follows: Direct materials $3.10 Direct labor 2.75 Variable overhead 1.15 Fixed overhead 1.80 Total $8.80 Suppose a customer wants to have its company logo affixed to each paperweight using a label. Smooth Move would have to purchase a special fogo labeling machine that will cost $12,000. The machine will be able to label the 15,000 units and then it will be scrapped (with no further value). No other fixed overhead activities will be Incurred. In addition, each special logo requires additional direct materials of 50.20. Required: CONCEPTUAL CONNECTION Should Smooth Move accept the special order? No By how much will profit increase or decrease if the order is accepted? If your answer is decrease enter negative value. Decrease Bozo Inc. manufactures two products from a joint production process. The joint process costs $110,000 and yields 6,000 pounds of LTE compound and 14,000 pounds of HS compound. LTE can be sold at split-off for $55 per pound. HS can be sold at split-off for $8 per pound. A buyer of HS asked Baroto process is further into CS compound. IHS were processed further, it would cost $42,500 to turn 14,000 pounds of HS into 4,000 pounds of cs. The Cs would sell for $45 per pound. Required: 1. What is the contribution to income from selling the 14,000 pounds of HS at split-om? 2. CONCEPTUAL CONNECTION: What is the contribution to Income from processing the 14,000 pounds of his into 4,000 pounds of CS
