Question
The What a Medal Company manufactures medals for winners of athletic events and other contests. Its manufacturing plant has the capacity to produce 16,200 medals
The What a Medal Company manufactures medals for winners of athletic events and other contests. Its manufacturing plant has the capacity to produce 16,200 medals each month; current production and sales are 12,600 medals per month. The company normally charges $190 per medal. Cost information for the current activity level is provided in the accompanying table.
What a Medal has just received a special one-time-only order for 2,400 medals at $160 per medal. Accepting the special order would not affect the company's regular business. What a Medal makes medals for its existing customers in batch sizes of 60 medals (210 batches x 60 medals per batch=12,600 medals). The special order requiresWhat a Medal to make the medals in 20 batches of 120 each.
Requirement 2. Suppose plant capacity was only 13,200 medals instead of 16,200 medals each month. The special order must either be taken in full or rejected totally. Should What a Medal accept the special order?
Calculate the operating income with the one-time special order and the reduced plant capacity. (Round your answers to the nearest whole dollar. Use parentheses or a minus sign for negative amounts or operating losses.)
| With special order |
Sales |
|
Variable costs: | |
Direct materials |
|
Direct manufacturing labour |
|
Batch variable costs |
|
Fixed costs: | |
Fixed manufacturing costs |
|
Fixed marketing costs |
|
Total costs |
|
Operating income |
|
Complete the sentence below. (Round your answer to the nearest whole dollar. Enter a positive amount only.)
What a Medal ( )accept the order because accepting the order ( )the operating income by
$.
$ Variable costs (vary with units produced): Direct materials 466,200 Direct labour 504,000 Variable costs (vary with number of batches): 142,800 Setups, materials handling, quality control Fixed manufacturing costs 330,000 Fixed marketing costs 220,000 $ 1,663,000 Total costs *Costs of $142,800 are based on 210 batches at $680 per batchStep by Step Solution
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