Variable costs that vary with number of units produced
Direct materials	$300,000
Direct manufacturing labor	150,000
Variable costs (for setups, materials handling, quality control, and so on)
that vary with number of batches, 300 batches x $1,250 per batch	375,000
Fixed manufacturing costs	300,000
Fixed marketing costs	55,000
Total costs	$1,180,000

Reward Plus has just received a special one-time-only order for 5,000 windows at $125 per window. Accepting the special order would not affect the company's regular business or its fixed costs. Reward Plus makes windows for its existing customers in batch sizes of 50 windows 300 batches x 50 windows per batch = 15,000 windows). The special order requires Reward Plus to make the windows in 100 batches of 50 windows.

Requirement 1. Should

Reward Plus accept this special order? Show your calculations.Begin by completing an analysis, and start by showing the computation of the company's operating income without the special order. Next, calculate operating income with the special order, and then calculate the differences between the two columns. (Complete all answer boxes. For amounts with no change, make sure to enter "0" in the appropriate cells of the Difference column.)

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		Without
		One-Time Only
		Special Order
		15,000 Windows
Revenues
Variable costs:
	Direct materials
	Direct manufacturing labor
	Batch manufacturing costs
Fixed costs:
	Fixed manufacturing costs
	Fixed marketing costs
Total costs
Operating income

	Save Accounting Table...			+
	Copy to Clipboard...			+

With

One-Time Only

Special Order

20,000 Windows

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Based on the above calculations, Reward Plus should			the one-time only special order if it has no long-term
implications because accepting the order		operating income by $			.

Requirement 2. Suppose plant capacity were only

17 comma 50017,500

windows instead of

20 comma 00020,000

windows each month. The special order must either be taken in full or be rejected completely. Should

Reward PlusReward Plus

accept the special order? Show your calculations.Complete the analysis below to determine if

Reward PlusReward Plus

should accept the special order under this scenario.

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		With One-Time
		Only Special Order
		Under Reduced
		Plant Capacity
		17,500 Windows
Revenues
Variable costs:
	Direct materials
	Direct manufacturing labor
	Batch manufacturing costs
Fixed costs:
	Fixed manufacturing costs
	Fixed marketing costs
Total costs
Operating income

	Save Accounting Table...			+
	Copy to Clipboard...			+

Based on the calculations under this scenario, Reward Plus should				the one-time only special order under the
reduced capacity because accepting the order		operating income by $			.

Requirement 3. As in requirement 1, assume that monthly capacity is

20 comma 00020,000

windows.

Reward PlusReward Plus

is concerned that if it accepts the special order, its existing customers will immediately demand a price discount of

$ 15$15

in the month in which the special order is being filled. They would argue that

Reward PlusReward Plus's

capacity costs are now being spread over more units and that existing customers should get the benefit of these lower costs. Should

Reward PlusReward Plus

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 = OI; Special order = SO.)

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				Net increase (decrease)
	-		=	in OI from accepting SO
	-		=

Reward PlusReward Plus

should

not accept

accept

the one-time-only special order under this scenario because accepting the order

increases

decreases

operating income.

Choose from any list or enter any number in the input fields and then continue to the next question.