Special Order Total cost data follow for Greenfield Manufacturing Company, which has a normal capacity per period of 20,000 units of product that sell for $54 each. For the foreseeable future, regular sales volume should continue to equal normal capacity.

Direct material				$264,800
Direct labor				198,000
Variable manufacturing overhead				150,000
Fixed manufacturing overhead (Note 1)				118,800
Selling expense (Note 2)				129,600
Administrative expense (fixed)				50,000
				$911,200

Notes: 1. Beyond normal capacity, fixed overhead costs increase $4,500 for each 1,000 units or fraction thereof until a maximum capacity of 24,000 units is reached. 2. Selling expenses consist of a 10% sales commission and shipping costs of $1 per unit. Greenfield pays only one-half of the regular sales commission rates on sales amounting to $3,000 or more.

Greenfield's sales manager has received a special order for 2,500 units from a large discount chain at a price of $44 each, F.O.B. factory. The controller's office has furnished the following additional cost data related to the special order:

1. Changes in the product's design will reduce direct material costs by $4 per unit. 2. Special processing will add 10%to the per-unit direct labor costs. 3. Variable overhead will continue at the same proportion of direct labor costs. 4. Other costs should not be affected.

a. Present an analysis supporting a decision to accept or reject the special order. (Round computations to the nearest cent.)

Differential Analysis
	Per Unit	Total
Differential revenue		Answer
Differential costs
Direct material	Answer
Direct labor	Answer
Variable manufacturing overhead	Answer
Selling:
Commission	Answer
Shipping (F.O.B. factory terms)	Answer
Total variable cost	Answer	Answer
Contribution margin from special order		Answer
Fixed cost increment:
Extra cost		Answer
Profit on special order		Answer

b. What is the lowest price Greenfield could receive and still make a profit of $5,000 before income taxes on the special order?

Round answer to two decimal places, if applicable.

$Answer

Service Emphasis The following analysis of selected data is for each of the two services Gates Corporation provides.

				Service A	Service B
Per-service data at 10,000 services
Sales price				$36	$32
Service costs:
Variable				10	13
Fixed				6	4
Selling and administrative expenses:
Variable				5	3
Fixed				3	1

In the Gates operation, labor capacity is the company's constraining resource. Each unit of A requires 3 hours of labor, and each unit of B requires 2 hours of labor. Assuming that all services can be sold at a normal price, prepare an analysis showing which of the two services should be provided with any unused productive capacity that Gates might have.

	Service
	A	B
Revenue	Answer	Answer
Less: Variable cost	Answer	Answer
Contribution margin	Answer	Answer
Labor hours per unit	Answer	Answer
Contribution margin per labor hour	Answer	Answer

Any unused capacity should be devoted to Service B, which has $1 less contribution margin per labor hour than does Service A.

Any unused capacity should be devoted to Service A, which has $1more contribution margin per labor hour than does Service A.

Any unused capacity should be devoted to Service B, which has $1 more contribution margin per labor hour than does Service A.