Special Order

Tobitzu TV produces wall mounts for flat panel television sets. The forecasted income statement for 2009 is as follows:

Sales ($46 per unit)	$4,600,000
Cost of good sold ($32 per unit)	(3,200,000)
Gross profit	1,400,000
Selling expenses ($5 per unit)	(500,000)
Net income	$900,000

Additional Information (1) Of the production costs and selling expenses, $800,000 and $100,000, respectively, are fixed. (2) Tobitzu TV received a special order from a hospital supply company offering to buy 14,000 wall mounts for $30. If it accepts the order, there will be no additional selling expenses, and there is currently sufficient excess capacity to fill the order. The company's sales manager argues for rejecting the order because "we are not in the business of paying $32 to make a product to sell for $30." Calculate the net benefit (cost) of accepting the special order. $Answer

Sell or Process Further Great Lakes Boat Company manufactures sailboat hulls at a cost of $4,200 per unit. The hulls are sold to boat yards for $5,200. The company is evaluating the desirability of adding masts, sails, and rigging to the hulls prior to sale at an additional cost of $1,900. The completed sailboats could then be sold for $6,500 each. Calculate the net benefit (cost) of processing the boat hulls into sail boats. Assume sales volume will not be affected. Use a negative sign with your answer, if appropriate. $Answer