You are the controller for Comfort Shoe Company. The company has excess shoes which it has not
Question:
You are the controller for Comfort Shoe Company. The company has excess shoes which it has not been able to market through its own distribution outlets. The pres ident is negotiating with a large department store chain to sell Comfor shoes in order to utilize the excess capacity. He has asked you to estimate the minimum sell ing price below which Comfort should not accept an order from the retail chain Cost information per pair of shoes is:
Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Manufacturing overhead:
Variable 3 Fixed 2 Selling and administrative expenses:
Variable 1 Fixed 3 The fixed costs are the same whether or not the order is accepted.
1. What is the minimum selling price the company should accept based solely on cost information (not considering qualitative factors)?
2. Assume that the president agrees to sell 20,000 pairs at a price of $\$ 19$ per pair. What would be the expected increase in profit?
Step by Step Answer:
Survey Of Accounting
ISBN: 9780538846172
1st Edition
Authors: James D. Stice, W. Steve Albrecht, Earl Kay Stice, K. Fred Skousen