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SafeRide, Inc_ Accept or reject the order




Question;SafeRide, Inc. produces;air bag systems that it sells to North American automobile manufacturers.;Although the company has a capacity of 300,000 units per year, it is currently;producing at an annual rate of 180,000 units. SafeRide, Inc. has received an order;from a German manufacturer to purchase 60,000 units at $9.00 each. Budgeted;costs for 180,000 and 240,000 units are as follows;180,000 Units;240,000 Units;Manufacturing costs;Direct materials;$;450,000;$;600,000;Direct labor;315,000;420,000;Factory overhead;1,215,000;1,260,000;Total;1,980,000;2,280,000;Selling and administrative;765,000;780,000;Total;$;2,745,000;$;3,060,000;Costs per unit;Manufacturing;$;11.00;$;9.50;Selling and administrative;4.25;3.25;Total;$;15.25;$;12.75;Sales to North American manufacturers are priced at $20 per unit, but the sales;manager believes the company should aggressively seek the German business even;if it results in a loss of $3.75 per unit. She believes obtaining this order;would open up several new markets for the company's product. The general;manager commented that the company cannot tighten its belt to absorb the;$225,000 loss ($3.75 ? 60,000) it would incur if the order is accepted.;(a);Calculate;the net benefit (cost) of accepting the order from the German business.;(b);Calculate;the net benefit (cost) of accepting the order from the German business;assuming the company is operating at full capacity.


Paper#44607 | Written in 18-Jul-2015

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