Question
The Award Plus Company manufactures windows. Its manufacturing plant has the capacity to produce 12,000 windows each month. Current production and sales are 10,000 windows
The Award Plus Company manufactures windows. Its manufacturing plant has the capacity to produce 12,000 windows each month. Current production and sales are 10,000 windows per month. The company normally charges $300 per window. Cost information for the current activity level is as follows:
Variable costs that vary with number of units produced |
|
Direct materials | $600,000 |
Direct manufacturing labour | 450,000 |
Variable costs (for setups, materials handling, quality control, and so on) |
|
that vary with number of batches, 200 batches x $1,500 per batch | 300,000 |
Fixed manufacturing costs | 200,000 |
Fixed marketing costs | 50,000 |
Total costs 1,600,000 |
Award Plus has just received a special one-time-only order for 2,000 windows at $250 per window. Accepting the special order would not affect the company's regular business or its fixed costs. Award Plus makes windows for its existing customers in batch sizes of 50 windows (200 batches x 50 windows per batch =10,000 windows). The special order requires Award Plus to make the windows in 40 batches of 50 windows.
Requirement 1. Should Award Plus accept this special order? Show your calculations.
Begin by completing an analysis and start by showing the computation of the company's operating income without the special order. Next calculate operating income with the special order, and then calculate the differences between the two columns. (Complete all answer boxes. For amounts with no change, make sure to enter "0" in the appropriate cells of the Difference column.)
|
| Without |
|
| One-Time Only |
Special Order | ||
|
| 10,000 Windows |
Revenues | ? | |
Variable costs: | ? | |
Direct materials | ? | |
Direct manufacturing labour | ? | |
Batch manufacturing costs | ? | |
Fixed costs: | ? | |
Fixed manufacturing costs | ? | |
Fixed marketing costs | ? | |
Total costs | ? | |
Operating income | ? |
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