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The Goal One Company manufactures medals for winners of athletic events and other contests. Its manufacturing plant has the capacity to produce 11,000 medals each

The Goal One Company manufactures medals for winners of athletic events and other contests. Its manufacturing plant has the capacity to produce 11,000 medals each month. Current production and sales are 10,000 medals per month. The company normally charges $250 per medal. Cost information for the current activity level is as follows:

Goal One has just received a special one-time-only order for 1,000 medals at $200 per medal. Accepting the special order would not affect the company's regular business. Goal One makes medals for its existing customers in batch sizes of 200 medals (50 batches x 200 medals per batch =10 comma 000

medals). The special order requires Goal One to make the medals in 8 batches of 125 medals.

Requirement 1. Should Goal One 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. (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 Units

Revenues

$2,500,000

Variable costs:

Direct materials

$400,000

Direct manufacturing labor

350,000

Batch manufacturing costs

40,000

Fixed costs:

Fixed manufacturing costs

75,000

Fixed marketing costs

150,000

Total costs

$1,015,000

Operating income

$1,485,000

With

One-Time Only

Special Order

11,000 Units

$2,700,000

$440,000

385,000

46,400

75,000

150,000

$1,096,400

$1,603,600

Difference

1,000 Units

$200,000

$40,000

35,000

6,400

0

0

$81,400

$118,600

Based on the above calculations, Goal One should accept the one-time-only special order if it has no long-term implications because accepting the order increases operating income by

$118600

.

Requirement 2. Suppose plant capacity were only 10,500 medals instead of 11,000 medals each month. The special order must either be taken in full or be rejected completely. Should Goal One accept the special order? Show your calculations. Complete the analysis below to determine if Goal One should accept the special order under this scenario.

With One-Time

Only Special Order

Under Reduced

Plant Capacity

10,500 Units

Revenues=

Variable costs:

Direct materials=

Direct manufacturing labor=

Batch manufacturing costs=

Fixed costs:

Fixed manufacturing costs=

Fixed marketing costs=

Total costs=

Operating income=

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