Question
The Cardinal Company produces T-shirts promoting Otterbein University to various retailers. The cost of producing and selling a single T-shirt at the companys current activity
The Cardinal Company produces T-shirts promoting Otterbein University to various retailers. The cost of producing and selling a single T-shirt at the companys current activity level of 10,000 units per month are: Direct materials $ 3.00 Direct labor 2.00 Variable manufacturing overhead 1.00 Fixed manufacturing overhead 4.00 Variable selling and admin. Expenses 1.50 Fixed selling and admin. Expenses 1.00 The normal selling price is $16 per unit. The companys capacity is 12,000 units per month. Due to Otterbein University participating in the Division III National Championship game, an order has been received from a retailer for 2,000 additional T-shirts at $14 per unit. This order would not affect regular sales but would increase the companys total fixed costs by $10,000 Ignore the impact of income taxes in your calculation. Should the order be accepted? What would be the impact on monthly profits?
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