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Question 5 (9 marks) Asterix Co. produces mats for use in fitness centers. Production capacity is 20,000 mats per year. Asterix Co. has currently a
Question 5 (9 marks) Asterix Co. produces mats for use in fitness centers. Production capacity is 20,000 mats per year. Asterix Co. has currently a spare capacity of 2,000 mats. Obelix Co has contacted Asterix Co to place a one-off order for 2,000 mats. Budgeted cost for 20,000 units Variable Manufacturing costs Fixed Manufacturing costs $900,000 $800,000 Asterix Co normally sell mats for $100/mat, and Obelix Co has offered to pay $90 per mat. (i) What would be the incremental profit/loss if Asterix chooses to accept the special order for 2,000 mats? (3 marks) (ii) If Obelix Co wants to place a one-off order for 3,000 mats, and Asterix Co. choose to accept the special order, what would be the incremental profit/loss? (3 marks) (iii) If Obelix Co wants to place a one-off order for 3,000 mats and has additionally also requested that each mat be embossed with its company logo. An embossing machine costing $30 000 would therefore need to be purchased by Asterix Co. The machine could not be used for other products. What would be the impact on profit if Asterix Co would like to agree to these terms? (1 mark) (iv) Identify any two qualitative factors that Asterix Co. should consider prior to making a final decision regarding whether to accept the special order. (2 marks)
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