Question
The Swimming Swan produces and sells custom bathing suits. The coach of Batavia High School submitted a request for 15 RB5Y one piece bathing suits
The Swimming Swan produces and sells custom bathing suits.
The coach of Batavia High School submitted a request for 15 RB5Y one piece bathing suits with the school name and player number embroidered on the suits, for $99 a unit.
The Swimming Swan provided the following information regarding its cost to produce the RB5Y.
Direct materials ...................45
Direct labor ......................... 25
Manufacturing overhead ..... 36
Unit product cost ................106
Additional data related to this special order is below.
The company would need to embroider the special order. The cost of embroidery is $120.
The company would incur direct material and direct labor on the special order units.
Most of the manufacturing overhead is fixed. However, $10 of the manufacturing overhead is variable with respect to the number of suits produced.
Completing this order will not hinder its ability to produce and sell bathing suits to other customers.
1. What is the financial advantage (disadvantage) of accepting the special order from the wedding party?
2. Should the company accept the special order?
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