Question
[The following information applies to the questions displayed below.] Green Grow Incorporated (GGI) manufactures lawn fertilizer. Because of the products very high quality, GGI often
[The following information applies to the questions displayed below.] Green Grow Incorporated (GGI) manufactures lawn fertilizer. Because of the products very high quality, GGI often receives special orders from agricultural research groups. For each type of fertilizer sold, each bag is carefully filled to have the precise mix of components advertised for that type of fertilizer. GGIs operating capacity is 25,000 one-hundred-pound bags per month, and it currently is selling 23,000 bags manufactured in 23 batches of 1,000 bags each. The firm just received a request for a special order of 5,600 one-hundred-pound bags of fertilizer for $145,000 from APAC, a research organization. The production costs would be the same, but there would be no variable selling
1. What is the total relevant cost of filling this special sales order?
2. What would be the change in operating income if the special order is accepted?
3. What is the breakeven selling price per unit for the special sales order (i.e., what is the selling price that would result in a zero effect on operating income)?
4. Prepare comparative income statements, using the contribution format, for both the current situation and assuming the special order is accepted at the breakeven price determined in requirement 3.
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