Answered

Get the answers you need at Westonci.ca, where our expert community is always ready to help with accurate information. Connect with a community of professionals ready to provide precise solutions to your questions quickly and accurately. Get precise and detailed answers to your questions from a knowledgeable community of experts on our Q&A platform.

Mohave Corp. makes several varieties of beach umbrellas and accessories. It has been approached by a company called Lost Mine Industries about producing a special order for a custom umbrella called the Ultimate Shade (US). The special-order umbrellas with the Lost Mine Company logo would be distributed to participants at an upcoming convention sponsored by Lost Mine.
Lost Mine has offered to buy 1,500 of the US umbrellas at a price of $11 each. Mohave currently has the excess capacity necessary to accept the offer. The following information is related to the production of the US umbrella:
Direct materials $5.00
Direct labor 2.00
Variable manufacturing overhead 3.50
Fixed manufacturing overhead 2.50
Total cost $13.00
Regular sales price $19.00
Required:
1. Compute the incremental profit (or loss) from accepting the special order.
2. Should Mohave accept the special order?
3. Suppose that the special order had been to purchase 2,000 umbrellas for $9.00 each. Recompute the incremental profit (or loss) from accepting the special order under this scenario.
4. Assume that Mohave is operating at full capacity. Calculate the special-order price per unit at which Mohave would be indifferent between accepting or rejecting the special order.

Sagot :

anthougo

Answer:

Mohave Corp.

1. The incremental profit from accepting the special order is:

= $750.

2. Mohave should accept the special order.

Explanation:

a) Data and Calculations:

Special order quantity = 1,500

Special order price = $11 per unit

Direct materials                             $5.00

Direct labor                                      2.00

Variable manufacturing overhead 3.50  $10.50

Fixed manufacturing overhead                   2.50

Total cost                                                   $13.00

Regular sales price                                   $19.00

Relevant costs:

Direct materials                             $5.00

Direct labor                                      2.00

Variable manufacturing overhead 3.50  $10.50

Incremental Analysis:

Special order price =          $11.00

Variable cost per unit =     $10.50

Incremental profit per unit $0.50

Total incremental profit = $750 ( $0.50 * 1,500)

Thanks for stopping by. We are committed to providing the best answers for all your questions. See you again soon. Thank you for your visit. We're committed to providing you with the best information available. Return anytime for more. Get the answers you need at Westonci.ca. Stay informed with our latest expert advice.