Question
The Award Plus Company (APC) manufactures medals for winners of athletic events and other contests. Its manufacturing plant has the capacity to produce 10,000 medals
The Award Plus Company (APC) manufactures medals for winners of athletic events and other contests. Its manufacturing plant has the capacity to produce 10,000 medals each per month. Current production and sales are 7,500 medals per month. The company normally charges $ 150 per medal. Cost information for the current activity level is as follows:
Variable cost:
Direct materials$ 262,500
Direct labor300,000
Variable cost ( Set ups, material handling, quality control, etc.
That vary with the number of bathes, 150 bathes * 500 per batch)75,000
Fixed manufacturing costs275,000
Fixed marketing costs175,000
Total costs1,087,500
The Award Plus Company has just received a one time only special order for 2500 medals at $ 100 per medal. Accepting the special order would not affect the company's regular business. Award Plus Company makes medals for its existing customers in batch sizes of 50 medals. The special order requires Award Plus to make the medals in 25 bathes of 100 each.
Required:
1.Should APC accept this special order? Show your calculations
2. Suppose plant capacity were only 9000 medals instead of 10,000 medals each month. The order should either taken in full or rejected completely. Should APC accept the special order? 2. Suppose plant capacity were only 9000 medals instead of 10,000 medals each month. The order should either taken in full or rejected completely. Should APC accept the special order? Show your calculations.
Show your calculations.
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Understanding the Problem Award Plus Company APC is considering a onetime special order for 2500 medals at a reduced priceWe need to determine if accepting the order is profitableconsidering the incre...Get Instant Access to Expert-Tailored Solutions
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Step: 2
Step: 3
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