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FINANCIAL ACCOUNTING
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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Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the short-term effect on operating profit if Award Plus Company accepts the special sales order? (Round your answer to nearest whole dollar amount.) Operating profit (loss)
Transcribed Image Text:Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the short-term effect on operating profit if Award Plus Company accepts the special sales order? (Round your answer to nearest whole dollar amount.) Operating profit (loss)
Award Plus Company manufactures medals for winners of athletic events and other contests. Its manufacturing plant has the capacity to produce 10,000 medals each month; current monthly production is 7,640 medals. The company normally charges $260 per medal. Variable costs and fixed costs for the current activity level follow: Current Product Costs Variable costs Manufacturing Labor Material Marketing Total variable costs Fixed costs Manufacturing Marketing Total fixed costs $ 382,000 305,600 191,000 $ 878,600 $ 282,000 232,000 $ 514,000 $ 1,392,600 Total costs Award Plus has just received a special one-time order for 2,360 medals at $150 per medal. For this particular order, no variable marketing costs will be incurred. Cathy Senna, a management accountant with Award Plus, has been assigned the task of analyzing this order and recommending whether the company should accept or reject it. After examining the costs, Senna suggested to her supervisor, Gerard LePenn, who is the controller, that they request competitive bids from vendors for the raw materials because the current quote seems high. LePenn insisted that the prices are in line with those of other vendors and told her that she was not to discuss her observations with anyone else. Senna later discovered that LePenn is a brother-in-law of the owner of the current raw materials supply vendor.
Transcribed Image Text:Award Plus Company manufactures medals for winners of athletic events and other contests. Its manufacturing plant has the capacity to produce 10,000 medals each month; current monthly production is 7,640 medals. The company normally charges $260 per medal. Variable costs and fixed costs for the current activity level follow: Current Product Costs Variable costs Manufacturing Labor Material Marketing Total variable costs Fixed costs Manufacturing Marketing Total fixed costs $ 382,000 305,600 191,000 $ 878,600 $ 282,000 232,000 $ 514,000 $ 1,392,600 Total costs Award Plus has just received a special one-time order for 2,360 medals at $150 per medal. For this particular order, no variable marketing costs will be incurred. Cathy Senna, a management accountant with Award Plus, has been assigned the task of analyzing this order and recommending whether the company should accept or reject it. After examining the costs, Senna suggested to her supervisor, Gerard LePenn, who is the controller, that they request competitive bids from vendors for the raw materials because the current quote seems high. LePenn insisted that the prices are in line with those of other vendors and told her that she was not to discuss her observations with anyone else. Senna later discovered that LePenn is a brother-in-law of the owner of the current raw materials supply vendor.
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