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Exercise 4-37 Special Order (LO 4-1, 2)




Question;Exercise 4-37 Special Order (LO 4-1, 2)Mission;Electronics manufactures and sells basic DVD players for sale under;various generic store brand names. The cost of one of their models;follows:Materials $ 19.60Labor 13.60Variable overhead 6.60Fixed overhead ($3,541,600 per year, 466,000 units per year) 7.60Total $ 47.40Pacific;Cash & Carry, a chain of low-price electronic sales and rental;outlets, has asked Mission to supply them with 35,000 players for a;special promotion Pacific is planning. Pacific has offered to pay;Mission a unit price of $52 per DVD player. The regular selling price is;$76. The special order would require some modification to the basic;model. These modifications would add $5.60 per unit in material cost;$3.10 per unit in labor cost, and $2.10 in variable overhead cost.;Although Mission has the capacity to produce the 35,000 units without;affecting its regular production of 466,000 units, a one-time rental of;special testing equipment to meet Pacific?s requirements would be;needed. The equipment rental would be $56,000 and would allow Mission to;test up to 66,000 units.Required:a. Prepare;a schedule to show the impact of filling the Pacific order on Mission?s;profits for the year.(Enter your answers in thousands of dollars. Round;your answers to 1 decimal place.)b. From an operating profit perspective for the current year, should Mission accept the order?Noyesc. What is the minimum quantity of DVD players in the special order that would make it profitable?


Paper#40185 | Written in 18-Jul-2015

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