Special Order

Total estimated Annual fixed cost are $387,500 and annual sales of 10,000 units are expected. The selling price of a unit is $73. Per units cost are as fallows.

Direct Material5.00

Direct Labor6.00

Manufacturing overhead

Variable7.00

Fixed8.00

Selling Cost

Commissions1.00

Shipping1.50

Fixed1.00

$29.50

1. How much is the unit contribution margine?

2. The companies Cost formula for annual total cost would be?

3. A special onetime order be purchase 20, 000 units was recently received at the price of $60 per unit. There is enough capacity to fill the order and filling this order is not disrupt current operation. If the company accept this order

a) Variable manufacturing cost will reduce by $5 per unit and

b) Variable selling cost (both shipping and commotion) will go down by 80%

Should the special order be accepted or rejected and how much better off would be if they take your advice.

4.In negotiation a price, in order to not hurt profit the minimum acceptable selling price per unit would be.

$------------------------------

5. Now assume that two company at capacity and that accepting this order will displace other regularly scheduled work. Should they accept or reject this order and how much better or worse off would the company be?

Accept or reject$ better or worse

6. The price per unit that they could charge for this order without hurting their income is:

$------------------------------------per unit

7. Assume that the company has 2,000 units. Product A in their warehouse and must be sold immediately at a reduced price, otherwise they will become worthless and will have to be throughaway.

Assuming that the units must be shipped to the customer, what is the minimum total amount that they must charge for their units in order do not lose money?

__________________

8. The company has received an offer from Jacks Company who has offered to make the units and ship the units to the company's customers for a price of $18.50per unit.

Should the company accept the offer yes or no----------and by how much(benefits) $-------------

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