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The Medal Plus Company manufactures medals for winners of athletic events and other contests. Its manufacturing plant has the capacity to produce 12,000 medals each
The Medal Plus Company manufactures medals for winners of athletic events and other contests. Its manufacturing plant has the capacity to produce 12,000 medals each month. Current production and sales are 10,000 medals per month. The company normally charges $300 per medal. Cost information for the current activity level is as follows: (Click the Icon to view the cost information.) Medal Plus has just received a special one-time-only special order for 2.000 medals at $250 per medal. Accepting the special order would not affect the company's regular business. Medal Plus makes medals for its existing customers in batch sizes of 50 medals (200 batches x 50 medals per batch - 10.000 medals). The special order requires Medal Plus to make the medals in 40 batches of 50 each. Read the requirements i Data Table columns. (For amounts with no change, make sure to enter "o" in the appropriate cells of the Difference column.) Without With One-Time Only One-Time Only Variable costs that vary with number of units produced Special Order Special Order Direct materials S S 600,000 10,000 Units 12,000 Units Direct manufacturing labor 450,000 S 3,000,000 Revenues Variable costs (for setups, materials handling, quality control, etc.) Variable costs: that vary with number of batches, 200 batches x $1,500 per batch 300,000 Direct materials S 600,000 Fixed manufacturing costs 250,000 Direct manufacturing labor 450,000 Fixed marketing costs 50,000 Batch manufacturing costs 300,000 S 1.650.000 Total costs Fixed costs: Fixed manufacturing casts 250,000 i Requirements 50,000 Fixed marketing costs S 1,650,000 Total costs S $ 1,350,000 1. Should Medal Plus accept this special order? Show your calculations. Operating Income 2. Suppose plant capacity were only 11,000 medals instead of 12,000 medals each month. Medal Plus must accept or reject the special order in full. Should Medal Plus accept the special order? Show your calculations. Enter any number in the edit fields and then click Check Answer. 3. As in requirement 1, assume that monthly capacity is 12.000 medals. Medal Plus 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 parts the special order is being filled. Existing customers would argue that Medal Plus's capacity costs are now being spread over more units and that they should get the benefit of these lower costs. Should Medal Plus accept the neck Answer special order under these conditions? Show your calculations. 6 b remaining
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