1. If the company accepts this offer and rejects some business from regular customers so as not to exceed capacity, what would be the total net operating income next year? 2. If the company rejects the offer of the foreign distributor, how much is the opportunity cost? The manufacturing capacity of a company facilities is 32,000 units a year. A summary ofoperating results for last year follows:Sales (P120 per unit) ...Contribution marginP 2,160,0001,170,000500,000Fixed costs .A foreign distributor has offered to buy 17,000 units at P90 per unit next year. The companyexpects its regular sales in units next year to be 10% higher.

To evaluate the net profitability from a special order and whether to accept or reject a special…

1. If the company accepts this offer and rejects some business from regular customers so as not to exceed capacity, what would be the total net operating income next year? 2. If the company rejects the offer of the foreign distributor, how much is the opportunity cost?

1. If the company accepts this offer and rejects some business from regular customers so as not to exceed capacity, what would be the total net operating income next year? 2. If the company rejects the offer of the foreign distributor, how much is the opportunity cost?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

1. If the company accepts this offer and rejects some business from regular customers so as not to exceed capacity, what would be the total net operating income next year?

2. If the company rejects the offer of the foreign distributor, how much is the opportunity cost?

The manufacturing capacity of a company facilities is 32,000 units a year. A summary of
operating results for last year follows:
Sales (P120 per unit) ...
Contribution margin
P 2,160,000
1,170,000
500,000
Fixed costs .
A foreign distributor has offered to buy 17,000 units at P90 per unit next year. The company
expects its regular sales in units next year to be 10% higher.

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