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The Score One Company manufactures windows. Its manufacturing plant has the capacity to produce 6,000 windows each month. Current production and sales are 5,000 windows
The Score One Company manufactures windows. Its manufacturing plant has the capacity to produce 6,000 windows each month. Current production and sales are 5,000 windows per month. The company normally charges $200 per window. Cost information for the current activity level is as follows:
150,000 75,000 Variable costs that vary with number of units produced Direct materials Direct manufacturing labour Variable costs (for setups, materials handling, quality control, and so on) that vary with number of batches, 200 batches x $1,000 per batch Fixed manufacturing costs Fixed marketing costs Total costs 200,000 200,000 25,000 $ 650,000 Score One has just received a special one-time-only order for 1,000 windows at $175 per window. Accepting the special order would not affect the company's regular business or its fixed costs. Score One makes windows for its existing customers in batch sizes of 25 windows (200 batches x 25 windows per batch = 5,000 windows). The special order requires Score One to make the windows in 10 batches of 100 windows. Requirement 1. Should Score One accept this special order? Based on the above calculations, Score One should implications because accepting the order the one-time only special order if it has no long-term operating income by $ Requirement 2. Suppose plant capacity were only 5,500 windows instead of 6,000 windows each month. The special order must either be taken in full or be rejected completely. Should Score One accept the special order? the one-time only special order under the Based on the calculations under this scenario, Score One should reduced capacity because accepting the order operating income by $ Requirement 3. As in requirement 1, assume that monthly capacity is 6,000 windows. Score One is concerned that if it accepts the special order, its existing customers will immediately demand a price discount of $5 in the month in which the special order is being filled. They would argue that Score One's capacity costs are now being spread over more units and that existing customers should get the benefit of these lower costs. Should Score One accept the special order under these conditions? Show your calculations. Select the labels and then enter the amounts to calculate the net effect on operating income from accepting the special order under this scenario. (Use a minus sign or parentheses to show a net decrease in operating income from accepting the special order. Abbreviations used: Operating income = Ol; Special order = SO.) Net increase (decrease) in Ol from accepting SO Score One should the one-time-only special order under this scenario because accepting the order operating incomeStep by Step Solution
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