The Goal OneGoal One Company manufactures windows. Its manufacturing plant has the capacity to produce 11,000 windows each month. Current production and sales are 10,000 windows per month. The company normally charges $250 per window.
Cost information Variable costs that vary with number of units produced Direct materials 400,000 Direct manufacturing labour 350,000 Variable costs (for setups, materials handling, quality control, and so on) that vary with number of batches, 50 batches x $800 per batch 40,000 Fixed manufacturing costs 125,000 150,000 Fixed marketing costs 1,065,000 Total costs Print Done %24 Special order information Goal One has just received a special one-time-only order for 1,000 windows at $200 per window. Accepting the special order would not affect the company's regular business or its fixed costs. Goal One makes windows for its existing customers in batch sizes of 200 windows (50 batches x 200 windows per batch = 10,000 windows). The special order requires Goal One to make the windows in 8 batches of 125 windows. Print Done Required 1. Should Goal One accept this special order? Show your calculations. 2. Suppose plant capacity were only 10,500 windows instead of 11,000 windows 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. 3. As in requirement 1, assume that monthly capacity is 11,000 windows. Goal One is concerned that if it accepts the special order, its existing customers will immediately demand a price discount of $20 in the month in which the special order is being filled. They would argue that Goal One's capacity costs are now being spread over more units and that existing customers should get the benefit of these lower costs. Should Goal One accept the special order under these conditions? Show your calculations. Print Done (Complete all answer boxes. For amounts with no change, make sure to enter "0" in the appropriate cells of the Difference column.) Without With One-Time Only One-Time Only Special Order Special Order Difference 11,000 Windows 10,000 Windows 1,000 Windows 2$ 2,500,000 $ 2,700,000 $ 200,000 Revenues Variable costs: 400,000 $ 440,000 $ 40,000 Direct materials 350,000 385,000 35,000 Direct manufacturing labour 40,000 46,400 6,400 Batch manufacturing costs Fixed costs: 125,000 125,000 Fixed manufacturing costs 150,000 150,000 Fixed marketing costs 1,065,000 $ 1,146,400 $ 81,400 Total costs 1,435,000 $ 1,553,600 $ 118,600 Operating income Enter any number in the edit fields and then click Check Answer. %24 %24 With One-Time Only Special Order Under Reduced Plant Capacity 10,500 Windows 2,575,000 Revenues Variable costs: 420,000 Direct materials 367,500 Direct manufacturing labour Batch manufacturing costs Fixed costs: 125,000 Fixed manufacturing costs 150,000 Fixed marketing costs Total costs Operating income
